author: Trenciiard, J.

text:
    Edwin B. Goodell, substituted administrator with the will annexed, complainant and appellant, v. G. Rowland Monroe et al., defendants and respondents.
    [Submitted December 11th, 1916.
    Decided March 5th, 1917.]
    1. Apart from the right of retainer, and the right of reimbursement for moneys in fact advanced- to the estate in payment of its debts, an executor or administrator has no right to assign the assets of the estate to himself.
    2. An executor or administrator cannot purchase property of the estate which he represents except with the consent of the beneficiaries, and such a purchase is voidable at their option.
    3. A bank which made a loan to one Taylor, individually, on Taylor’s individutil note, and took, as collateral security, an assignment of a bond and. mortgage, property of the estate of which Taylor was executor, cannot hold such bond and mortgage, as against the estate, when the bank knew at the time it made the loan to Taylor, individually, that the bond and mortgage had been assigned by Taylor, as executor, to himself individually, without consideration, and when the bank made the loan, by its cashier’s check drawn to the order of Taylor, individually, and the endorsement on 'that check, on its presentation for payment, showed that it had been deposited to Taylor’s personal account, and not to the account of the estate, and when the bank, nevertheless, paid the check.
    4. An executor or administrator has no authority to pledge personalty belonging to the estate to secure his own debts.
    5. Although an executor or administrator has no authority to pledge-the personalty of the estate for his own debts, such pledge is valid as against the estate if it is based on a valuable consideration, and the pledgee has no notice, actual or constructive, that the executor or administrator is making the pledge to secure his own debts.
    6. Where property belonging to tlie estate of a deceased person is pledged by the executor or administrator for his own use, and the pledgee has actual or constructive notice of that fact, the pledge is not valid as against the estate.
    7. Where, on the face of the transaction, it is evident that the. executor or administrator sells or pledges securities which belong to the estate as his own, and not as executor or administrator, the purchaser or pledgee deals with him at his own risk, and the purchaser or pledgee will be liable in case of loss to the estate.

      S. "Where a bank loans money to one who is the executor of-an estate,on his individual note, and takes as- collateral security a bond and mortgage known to the bank to be assets of the estate, upon, the understanding that he would; turn the money over to the estate, the transaction gives rise to a species of equitable guaranty by the bank that its participation should not result in loss to the estate, and to that extent the bank is bound to see to the application of- the moneys loaned. The duty that is controlling is that expressed in the maxim, “Equity regards as done that which ought to have been done,” which means that where an obligation 'vests upon, a peí-son to perform an act, equity will treat the person in whose favor the act should be performed as clothed with the same interest and entitled to the same rights as if the act were actually performed.
    On appeal .from a decree of tbe court of chancery advised by Vice-Chancellor- Stevens, whose opinion is reported in 86 N. J. Eq. 18.

      Mr. Edward M. Colie, for the appellant.

      Messrs. Wo'lber & Blake, for the respondents.
   The opinion of the court was delivered by

Trenciiard, J.

On June 1st, 1911, Lewis P. Taylor and Andrew S. Taylor, as executors of the estate of Anna A. Burnett (who died in 1907), sold a piece of real estate, of which she died seized, to James J. Fitzsimmons, and took from him in part payment therefor a bond and purchase-money mortgage for $5,000.

On the same day Fitzsimmons conveyed the premises so sold and niortgaged to Emile C. Bataille and wife.

Bataille, who made the bargain for and who took title to this property, was the president of the American National Bank, the defendant in this case.

The mortgage fell due June 1st, 1912, and shortly thereafter, Andrew S. Taylor (his co-executor being then • deceased) went to Bataille, the president of the bank, and sought to have the mortgage paid, saying that the legatees of his testatrix were clamoring for the money. Bataille, for some reason, was unable or unwilling to pay the mortgage, and suggested a loan by the bank to the estate. Taylor said that he “could not borrow money as an executor, but that he would, do so in his individual capacity and turn the money over to the estate,” and Bataille thereupon referred Taylor to Mr. Monroe, the bank’s attorney. Taylor went to Mir Monroe and said that it had been arranged between himself and Bataille that the bond and mortgage should be used as collateral security to obtain a loan from the bank, and that, a's he “didn’t feel that he had any authority to pledge the credit of the estate” by giving a note as executor, he proposed assigning the bond and mortgage to himself, individually, and then giving a note to the bank for $5,000 made by himself, individually, and assigning the bond and mortgage as collateral security for its payment to Mr. Monroe as trustee for the bank. This pian was carried through. Taylor assigned the bond and mortgage to himself, individually, and then, individually, assigned them to Mr. Monroe as trustee. The bank then made the loan by its cashier’s check for $5,000, drawn to the order of Taylor, individually, and took his personal note, and received the bond and mortgage and the assignments as collateral security. The endorsement on that check, on its presentation for payment, showed that it had been deposited in another bank to Taylor’s personal account and not to the account of the estate. The check was, nevertheless, paid by the defendant bank on presentation. Thereafter Taylor applied only $1,100 of the money thus received to the payment of legacies, using the remainder for his own purposes. Some time afterward he was removed as executor because of his fraudulent dealings with the funds of the estate, and Mr. Goodell, the present complainant, was appointed administrator. with the will annexed. Not finding the bond and mortgage among the assets turned over to him, he traced them to the possession of the bank, and upon being refused their return, filed the present bill to compel their surrender, upon the ground that the whole transaction between Taylor and the-bank was illegal and void so far as the estate which the complainant represents is concerned.

The learned vice-chancellor considered that the general rule that a person who takes a mortgage from an executor is not bound to see to the application of the purchase-money, was applicable to the present case.

We are of the opinion that such conclusion was unsound.

Leaving out of account the right of retainer, and the right of reimbursement for moneys in fact advanced to the estate in payment of its debts (with which we are not now concerned), an executor or administrator has no right to assign the assets of the estate to himself. Hunt v. Smith, 58 N. J. Eq. 25.

He cannot even purchase the property of the estate except with the consent of the beneficiaries, and such a. purchase is voidable at their option, Mulford v. Minch, 11 N. J. Eq. 16.

The bank, is chargeable with knowledge of these legal rules. It knew, then, that the assignment of the bond and mortgage by Taylor, as executor to himself, individually, without any consideration whatsoever passing to the estate, was a violation of his'duty to the estate, and would be declared to be of no effect, if submitted to judicial scnvtiny.

The question, therefore, is, whether the bank, which made the loan to Taylor, individually, on Taylor’s individual note, and took, as collateral security for that note, an assignment of the bond and mortgage, property of the estate of which Taylor was surviving executor, can hold the bond and mortgage thus pledged as collateral security, as against those who are by the will entitled to the estate, when the bank knew at the time it made the loan to Taylor, individually, that the bond and mortgage had been assigned by Taylor as executor to himself, individually, without consideration, and when the bank made the loan, by its cashier’s- check drawn to the order of Taylor, individually, and the'endorsement on that check; on its presentation for payment, showed that it had been deposited to Taylor’s personal account, and not to the account of the estate,-and when the bank, nevertheless, paid the check and consummated the transaction.

"We are constrained to think that such question must be answered in the negative.

The transaction in 'question was so planned and executed as to malee it appear on the face of things that the estate sold the-bond and mortgage to Taylor, and that Taylor pledged them to the bank to secure the money which he borrowed in his individual capacity, and was to turn over to the estate. But since the estate did not get the money, so far as the transaction be regarded as a sale, it was invalid as against the estate.

Taking the transaction, so far as the estate is concerned, as a pledge, it is likewise invalid'as against the estate.

It is well settled that an executor or administrator has no authority to pledge personalty Belonging to the estate to secure his own debts. Prall v. Tilt, 28 N. J. Eq. 479; Farmers, &c., Bank, v. Sanford, 150 Ala. 195; Boeger v. Langenberg, 42 Mo. App. 7; Linton’s Appeal, 14 W. N. C. (Pa.) 450.

It is' true, that, although an executor or administrator has no authority to pledge the personalty of the estate for his own debts, such a pledge is valid as against the estate if it is based on a valuable consideration, and the pledgee has no -notice, actual or constructive, that the executor or administrator is making the pledge to secure his own debts. Prall v. Tilt, supra; Sutherland v. Brush, 7 Johns. Ch. (N. Y.) 17.

But where property belonging to the estate of a deceased person is pledged by the executor or administrator for his own use, and the pledgee has actual or constructive notice of that fact, the pledge is not valid as against the estate. Prall v. Hamil, 28 N. J. Eq. 66; Field v. Schieffelin, 7 Johns. Ch. (N. Y.) 150; Petrie v. Clark, 11 Serg. & R. 386.

The English cases up to the time of the decision of Chancellor Kent in Field v. Schieffelin, supra, are all reviewed in his opinion, and (at p. 160) the chancellor says:

“I have thus looked pretty fully into the decisions in the analogous case of a purchase from an executor of the testator’s assets; and they all agree in this, that the purchaser is safe; if he is no party to any fraud in the executor, and has no knowledge or proof that the executor intended to misapply the proceeds, or was, in fad, by the very iransadion, applying them to the extinguishing of his own private debt. The great difficulty has been to determine how far the purchaser dealt at his peril when he knew, from the very face of the proceedings, that the executor was applying the assets to his own private purposes, as the payment of his own debt. The latter and better doctrine is, that in such a case, he does buy at his peril; but that if he has no such proof or knowledge, lie is not bound to inquire into the state of the trust, because lie has no means to support the inquiry, and he may safety repose on the general presumption that the executor is in the due exercise of his trust.”

In Field v. Schieffelin the facts were that the guardian assigned the mortgage as guardian to one W. J. S. for the full amount of the principal and interest then due, and there was nothing in anywise irregular in the transaction. On these faetsthe chancellor found that there was no proof of a devastavit and that the assignment was in all respects regular. There was not, as here, an assignment to the fiduciary personalty and the pledge of a bond and mortgage to secure his personal note nor the presentation of a check for payment showing, on its face, a misappropriation of the fund. Had such facts appeared, no doubt the decision would have been contrary to that reached. It will be noted that (at p. 161) the chancellor uses the language: “There is no ground for an inference of fraud or for a charge of gross negligence!’ .

In Petrie v. Clark, 11 Serg. & R. 377, Mr. Justice Gibson, after careful consideration, states the law to be as follows:

“l'n chancery, however, the executor’s interest is purely fiduciary ; and the law exacts from those dealing with him, with full knowledge of his representative character, the most perfect good faith. Now, the assets are a fund in his hands, not for the payment of his own debts, but the debts of the testator, and the legacies bequeathed in the will; and where the assignee knows at the time that he is receiving his debt out of a fund which is not the property of the person paying, but which is appropriated to the payment of other debts, that alone is a circumstance of suspicion that ought to put him on inquiry as to the propriety of the transaction. An executor may, in some cases, with strict propriety, convert the assets to his own use, as where he has paid debts of the testator to the value, with his own money j but where the assignee finds him, in the first instance, applying the assets out of the ordinary course of administration, it may bear on argument, whether he does not take1 upon himself the risk of the executor’s right to apply them, or of his ability to replace them, if they were improperly withdrawn from the fund; and later cases have, I think, gone this length. It is no answer to say, that the executor may sell the goods and pay his debt with the price, if the creditor knew that the payment made under these circumstances would prejudice the creditors or legatees, he would be a party to the devastavit, and liable to refund; for money where it is received mala fide may be followed as readily as a chattel.”

TVe think that the principles enunciated in these opinions, one by Chancellor Kent and the other by Chief-Justice Gibson, are sound.

The true rule is, that where, on the face of the transaction, it is evident that the executor sells or pledges securities which belong to the estate as his own, and not as executor, the purchaser or pledgee deals with him at his own risk, and the purchaser or pledgee will be liable in case of loss to the estate.

' Now, in the present case, the bank knew, from the very face of the proceeding, and otherwise, that Taylor was pledging securities of the estate to secure his individual note; it knew that the securities had been transferred from Taylor, executor, to Taylor, individually, without consideration, and for the express purpose of preventing the transaction from speaking as a loan to the executor for the purposes of the estate. Both the bank and Taylor were at great pains throughout to earmark the transaction, in every way, as a transaction between the bank and Taylor as an individual, and to expressly negative the idea of a transaction with Taylor as executor. This arrangement was more than a mere matter of form. It amounted, substantially, to an arrangement between Taylor and the bank by which the bank agreed with Taylor that Taylor should convert the bond and mortgage belonging to the estate to his own use for the purpose of obtaining a loan from the bank as an individual, trusting to Taylor to pay the estate the money he owed it for the conversion of the bond and mortgage.

Clearly, the bank put through this transaction at its own risk, and, since the estate received but a small portion of the proceeds of the bond and mortgage, the bank is responsible for the balance. The transaction is deemed to have given rise to a species of equitable guaranty by the bank that its participation in that irregular dealing with the assets of the estate should not result in loss to the latter, and to that extent, the bank was bound to see to the application of the money loaned. How this guaranty should be worked out was at the will of the bank, provided the equitable results be obtained. It might have been by making its check to the executor, as such, or by otherwise assuming the responsibility for the application of the money to the purposes of the estate—but however done, the duty that was controlling is that expressed in the maxim “Equity regards as done that which ought to have been done,” which means that where an obligation rests upon a person to perform an act, equity will treat the person in whose favor the act should be performed as clothed with the same interest and entitled to the same rights as if the act were actually performed. Shipman v. Lord 58 N. J. Eq. 380; Armour v. Connolly, 63 N. J. Eq. 788.

This duty to see to it that the estate did not suffer by reason of the bank’s participation in the irregular transaction the bank failed to perform. It made no effort to see to a proper application of the funds. It did not draw the check to the order of the estate, nor did it, after making the check to Taylor, individually, have him endorse it over to the estate, but, on the contrary, it consummated the transaction by paying the check, with- actual notice by the endorsement that Taylor was appropriating the money to his own personal account.

The cases cited by the respondent are not to the contrary.

The question, in Foster v. Dey, 27 N. J. Eq. 599, was, whether under the facts in that case the purchaser of a mortgage from the trustee, as such, was hound- to see to the application of the purchase-money.

The transaction involved the sale of a mortgage by a trustee who received the consideration of the sale (at p. 604); concluding his opinion, Mr. Justice Reed says: ■

“The trustee so having the power of sale, and it having been made in what I conceive to b'e no unusual manner, or at no obvious sacrifice, I do not think any knowledge can, from it, be charged upon Foster of the intended disposition by Dey of the trust fund received from the sale.”

There was nothing whatever irregular in the transaction, nor anything to charge the purchaser with notice. The case is, therefore, no authority for the respondent in the present case.

Gottberg v. United States National Bank, 13 N. Y. Supp. 841, is not applicable to the present case, as the facts are fundamentally dissimilar. In that case the bank had no knowledge that the estate had any interest in the security; while in the present case the bank knew full well that the security belonged to the estate.

Carter v. Manufacturers National Bank of Lewiston, 71 Me. 448, is not in point, the facts varying in numerous fundamental particulars from those in the present case. The facts in the Garter Case seem to be these: John G. Cook was executor of one Redington. Cook had fifty shares of stock transferred into the name of Cook, executor. He then “made a loan from the defendant bank of $500, giving a note therefor; that at the time of procuring said loan Cook transferred the fifty shares of stock to the bank as collateral security for the loan; that Cook assumed to transfer the stock and made the loan in his capacity as executor; that the money was loaned in good faith by the defendant and upon the statement made by Cook that the same was wanted in the settlement of the estate.” Thus the transfer of the stock was directly from Cook, executor, -to the bank, while the assignment of the bond and mortgage in the present ease was not from Taylor, executor, directly to the bank,' but from Taylor, executor, to Taylor, individually, and then from Taylor, individually, to the bank.

There is another difference between the cases. In the Carter Case the court said: “The case finds That the money was loaned in good faith by the bank and upon the statement made by Cook that the same was wanted in tire settlement of the estate.’ The presumption is that he was acting faithfully. There is no evidence to the contrary, and the presumption must stand.” From this it would seem that Cook never misappropriated the proceeds, but acted honestly throughout. The action was one of conversion, brought, perhaps, in an effort by the estate to avoid the loss resulting from a decrease in the value of the stock.

In Ashton v. Atlantic Bank, 3 Allen 217, the facts were “that the defendants had no notice or knowledge of the facts relating to the trust except what appeared on the face of the notes-and certificate,” and that “the facts apparent on the face of the -notes were not sufficient to establish the position that the purchaser kntiv the trustee was about to commit a breach of trust.”

Jn the later case of Shaw v. Spencer, 100 Mass. 382, commenting on the decision in Ashton v. Atlantic Bank, the court said: “In short, the court came to the conclusion that the act of the trustee was itself lawful in that particular case, and that his fraud consisted only in the misuse of the money when obtained. If this was true, of course, the purchaser was not bound to see to the application of the purchase-money.”

This reference to the opinion in Ashton v. Atlantic Bank indicates that the latter case is one depending upon the special finding of fact by the court and not illustrative of the general doctrine. ' ' .

The Ashton Case, however, illustrates the effort always made by the courts to protect those properly dealing with -negotiable paper, and at the same time to protect estates. The opinion (at p. 221) contains the following:

“We are aware of the great vigilance with which courts of equity watch over trust funds, and that all who fraudulently aid in their misappropriation to the injury of the cestuis que trust, by becoming purchasers or holders of such securities, do it at their peril. But while the courts are thus vigilant in protecting trust property, they are alike bound to protect those who in good faith have received negotiable paper, negotiated before maturity, and endorsed by the payee, and have upon such negotiable paper thus transferred to them advanced the whole value thereof, in the ordinary course of business.”

The decree below will be reversed and the record remitted to the court of chancery, to the end that it be decreed that the bond and mortgage be assigned by the bank to the complainant on payment by the complainant to the bank of $1,100 which was applied by Taylor to the benefit of the estate out of the $5,000 loan to him individually.

The complainant is entitled to costs in this court and in the court of chancery.

For affirmance—None.

For reversal—Ti-ie Chiee-Justice, Garrison, Swayze, Trenci-iard, Parker, Bergen, Minturn, Kalisci-i, Black, White, Heppeni-ieimer, Williams, Gardner—13.


source: Caselaw Access Project

author: Trenchard, J.

license: Public Domain

text:
    Frank Brunetto, complainant and respondent, v. Town of Montclair, in the County of Essex, et al., defendants and appellants.
    [Submitted December 11th, 1916.
    Decided March 5th, 1917.]
    1. An injunction will not issue to restrain a prosecution for a penalty under a municipal ordinance regulating the erection of buildings, on the mere ground that such ordinance is invalid or does not bind the property of the party seeking the injunction. Such grounds, if sound, constitute a complete defence to the prosecution in a court of law, and if convicted he has an adequate remedy by certiorari.

    2. The object of a preliminary injunction is to prevent some threatening, irreparable injury pending a full and deliberate investigation of the ease upon its merit's, and it will not be ordered unless from the pressure of urgent necessity, and. where the damage threatened during the pend-ency of the suit is of an irreparable character.
    3. A preliminary injunction will not be granted merely to allay the fears and apprehensions of individuals. They must show the court that the acts against which they ask protection are not only threatened, but will, in probability, be committed to their injury.
    4. The award by the court of chancery of a preliminary injunction restraining a town and its building inspector from tearing down a building pendente lite, will be reversed when the material allegations of the bill, on which the complainant’s equity depends, are met by a full, explicit and circumstantial denial under oath, from which it seems reasonably certain that there was no intention nor threat to tear down the building, but rather that the sole purpose of the town and its officer was to put the question in dispute between the town and the complainant in such form that it may be judicially decided.

      On appeal from an order of the court of chancery advised by Vice-Chancellor Howell.

      Messrs. Ha/rfshome, Insley ,& Leake, for the appellants.

      Mr. Howard F. Kirk, for the respondent. f
   The opinion of the court was delivered by

Trenchard, J.

This is an appeal from the award of a preliminary injunction.

The complainant below, Prank Brunetto, owned a lot of land on Bloomfield avenue, partly within the town of Montclair, and partly within the borough of Glen Ridge, the dividing line between the two municipalities running diagonally across the lot.

He wished to build a frame building on the fear of the lot, which was in Glen Ridge, and also apparently desired that the whole lot should be within the corporate limits of the town of Montclair.

Accordingly, on February 7th, 1916, tire corpplainant’s son caused to be introduced in the legislature a bill altering the Montclair line so as to coincide with the side and rear lines of complainant’s lot and so bring the entire lot within the Montclair limits. That bill was passed and approved by 'the governor, March 17th, 1916, and by its terms became effective April 1st, 1916. P. L. 1916 p. 29k-

On March 6th, 1916, the complainant applied to the building inspector df the borough of Glen Ridge for a permit for the moving of an old building to a new location and the erection of a new building on the rear part of his lot, and on March 7th, 1916, received such permit.

On March 7th, 1916, he began work and continued until April 6th, 1916, when the old building had been moved, the cellar excavated for the new building, and the cellar walls laid ready for the first tier of .beams.

On April 6th, 1916, the building inspector, of the town of Montclair (the act of annexation having taken effect April 1st, 1916) ordered the complainant to stop work on the frame build-mg until a permit therefor was obtained from the town of Montclair as required by the “fire limit ordinance” of the town regulating the erection of buildings, and requiring permits therefor, adopted October 24th, 1910.

The following day complainant applied for such a permit and was refused because the proposed building did not conform to the requirements of the ordinance.

Thereupon the complainant filed this bill and took an order to show cause why an injunction should not issue restraining the town of Montclair and its building inspector from further proceedings to enforce the provisions of the “fire limit ordinance.” Upon the hearing of that order upon the bill and affidavits a preliminary injunction was issued restraining the defendants 'pendente lite from enforcing the fire limit .ordinance against the complainant with reference to the building in question, and also irom abating, tearing down, removing or destroying such building, and from instituting suit for the'penalty provided by the ordinance.

We are of the opinion that the defendants’ appeal from that order is well taken.

The complainant averred in his bill, and it was admitted in the defendants’ answering affidavit, that the building inspector of the defendant municipality ordered the complainant to stop work on his building until he procured a permit, and that he declared that if work was resumed without a permit, suit would be instituted for the penalty prescribed in the fire limit ordinance. The complainant further averred (.whether rightly or wrongly we do not now decide) that the ordinance in question was invalid and not effective as to his property, and contended, and now contends, that he was entitled to have the municipality and its officers enjoined from instituting suit for such penalty.

We think not. An injunction will not issue to restrain a prosecution for a penalty under a municipal ordinance regulating the erection of buildings on the mere ground that such an ordinance is invalid or that it does not bind the property of the party seeking the injunction. Such grounds, if sound, constitute a complete defence to the prosecution in a court of law, and, if eonvictecl, he has an adequate remedy by certiorari. Bloomfield v. Glen Ridge, 55 N. J. Eq. 505.

If equity had jurisdiction upon such ground, every controversy over the validity and binding effect of many ordinances enacted by the municipalities in the exercise of powers conferred upon them would furnish an occasion for interference by injunction; and thus would be presented the remarkable situation of courts of equity exercising supervisory power over the administration of a not inconsiderable part of the penal laws of the state.

It was, therefore, improper to restrain the defendants from beginning suit for the penalty of the ordinance.

It remains to be considered whether the injunction against tearing down the building was justified.

The object of a preliminary injunction is to prevent some threatening, irreparable injury pending a full and deliberate investigation of the case upon the merits, and it will not be ordered unless under the pressure of urgent necessity, and where the damage threatened during the pendency of the suit is of an irreparable-character. Meyer v. Somerville Water Co., 79 N. J. Eq. 613; Citizens’ Coach Co. v. Camden Horse Railroad Co., 29 N. J. Eq. 299.

It will not be granted merely to allay the fears and apprehensions of individuals. They must show the court that the acts against which they ask protection are not only threatened, but will, in probability, be committed to their injury. Meyer v. Somerville Water Co., supra; Lutheran Church v. Maschop, 10 N. J. Eq. 57.

The general rule is that a preliminary injunction will not issue where the material facts in the bill, on which the complainant’s equity depends, are met by a full, explicit and circumstantial denial under oath. Meyer v. Somerville Water Co., supra; Citizens’ Coach Co. v. Camden Horse Railroad Co., supra; Schlemm v. Whittle, 99 Atl. Rep. 206.

Now, in the present ease, the complainant contends that the allegation in his bill by way of conclusion that the.town and building inspector “are threatening and preparing to tear down said building if your orator were to complete it according to his plans” justifies the preliminary injunction. We think not. The defendant’s affidavit made by the building inspector makes full, explicit and circumstantial denial of any such threat. He swears that the only thing he stated was that if work was continued he would begin suit for the penalty provided for in the ordinance. Moreover, he also denies under oath that he has, or ever had, any intention of tearing down complainant’s building. It therefore seems reasonably certain that the sole purpose of the town and of its duty-authorized officer was and is to put the question in dispute between the town and the. complainant in such form that it may be judicially decided. In such case a preliminary injunction was not justified.

On the question whether, if the proof had been different, chancery would have had jurisdiction, we express no opinion.

The order appealed from will be reversed, with costs.

For affirmance—None.

For reversal — The Chief-Justice, Garrison, Swayze, Trenohard, Parker, Bergen, Minturn, Kalisci-i, Black, White, Hepeeni-ieimer, Williams, Gardner—13.


author: Parker, J.

text:
    Supreme Lodge, Knights of Pythias, complainant-respondent, v. Lillian M. Rutzler, trustee, defendant-appellant.
    [Submitted December 11th, 1916.
    Decided March 5th, 1917.]
    1. In the case of a simple, or dry trust, i. e., one in which the nature of the trust is not qualified by the settler, the cestui que trust has the right to be'put in actual possession of the property.
    2. In the case of a simple trust, if the cestui que trust die before taking possession, the right of possession in the case of personal property passes to'the personal representative.

      3. Where a trust of personal property appears to be completely and clearly declared by a writing to which the settler was a party, parol evidence is inadmissible to vary or defeat such, declaration.
    4. The oral declarations of the holder of a benefit certificate in a mutual benefit association are inoperative to confer beneficiary rights therein, in the absence of any element of contract.
    5. A death benefit certificate was payable to R. as trustee for L., who died after the holder of the certificate but before' R. collected the money thereon.,—Held, that the society properly paid the money to the administratrix of L., and was entitled to enjoin a suit at law by R. for the money.
    On appeal from a qlecree of the court of chancery advised by Vice-Chancellor Lewis, whose opinion is reported in-86 N, J. Eq. 387.

      Mr. Frank G. Turner, for the ajDpellant.

      Messrs. McDermott & Enright, for the respondent.
   The opinion of the court was delivered by

Parker, J.

The suit would be essentially one of interpleader except for the fact that complainant before filing its bill had already paid over the fund to one of the claimants and sought by the bill to be protected in that-course, and to secure an injunction against the further prosecution of a suit at law by the other claimant.

The fund was the proceecls of a death benefit certificate issued by the complainant to Henry B.-Lupton in his lifetime. At the time of his death it was payable to “his daughter Lillian M. Rutzler as trustee for his daughter Florence S. Lupton.” Florence survived her father, but died before the money was paid, and this raised the qiiestion whether Lillian, as “trustee,” was entitled to the money, or Florence’s mother, Anna, who had taken out letters of administration of Florence’s estate. The complainant finally paid the money to Anna, as administratrix, and, upon Lillian bringing an action at law against complainant on the certificate, filed this bill for an injunction, making the administratrix also a party. On final hearing an injunction was awarded and Lillian appeals.

We are of opinion that the court of chancery properly enjoined the suit at law. On the face of the certificate the trust was a “dry” or passive one. The characteristics of such a trust are so elementary that in all the range of our reported equity decisions I do not find, and counsel do not appear to have found, any direct adjudication of them. In Cooper v. Cooper, 36 N. J. Eq. 121, 123, they are described incidentally by Chancellor Runyon, quoting from Lew. Trusts (8th ed. § 18) 21. In Rosenbaum v. Garrett, 57 N. J. Eq. 186, the disposition of the fund turned on whether tire trust was to be held active or passive; and Vice-Chancellor Reed (on p. 1'9'L) held that if the trust wás passive (i. e., if the trustee had no active duties to perform in respect to the trust estate) he could be called on to convey it to the cestui que trust or her appointee. See, also, Perry Trusts § 18; sections 520 et seq., and 39 Cyc. 30, where the classification of trusts into “simple” and “special” is dealt with as synonymous with passive (or dry) and active. As the trustee of a passive trust, the sole duty of Lillian after her father’s death and in the lifetime of the sister was to act as a conduit of the money from the complainant to Florence or her appointee. Upon the death of Florence, her personal representative became vested with the same jus habendi that Florence had in her lifetime; and, as the vice-chancellor very properly said, if the complainant had paid the money over to the trustee, there was nothing for the trustee to do but to turn it over to the administratrix. As the complainant wished to settle the question who was the beneficial owner of the fund as distinct from the purely legal owner, the litigation was properly transferred into the court of chancery by filing the bill, and properly retained there for the settlement of this equitable question; and the award of an injunction against proceeding further with the action at law was a'remedy incidental to the nature of the case and the jurisdiction of the court.

It is urged, however, that the trust was not wholly as expressed in the benefit certificate, but that'in .the contingency of Florence’s death even after his own, it was intended by her father that it should go to the two sisters, Lillian and Emily, in equal shares.

The documentary proof shows that the first benefit certificate was payable to Lillian and Emily equally. This was in 189-9. In January, -1906, deceased applied in conformity with the rules, for a change of beneficiary, by surrendering, the certificate, and requesting a new one payable to “Lillian M. Rutzler (daughter), as trustee for Florence S. Lupton (daughter).” This was done, and the new certificate issued under date of February 17th, 1906. Florence was then thirteen years old, and the desirability of a trustee to hold legal title to the money in case of her death was obvious. She was eighteen when her father died in February, 1911, and still disqualified to deal legally with her property.

The only evidence in support of the claim of the sisters is their own oral testimony. We think it was not competent to contradict or vary the express trust; that if competent and believed, it was ineffective to impress a trust on the fund but merely indicated a testamentary intention not legally executed; and that in. any ease when read in connection with the other conceded facts, it does not indicate that the father contemplated the money passing to Lillian and Emily except in the event of Florence’s death before his own.

As to the competency of the testimony (which was duly objected to), we take the rule to be that, while in cases of trusts of personal property to which the statute of frauds does not apply, they may be proved by parol, and, if .indicated by a writing, the writing may be supplemented by parol proof where it is vague or incomplete (Eaton v. Cook, 25 N. J. Eq. 55), yet, if there is á writing complete on its face, it cannot'be varied or contradicted by oral evidence. Perry Trusts § 76; Peer v. Peer, 11 N. J. Eq. 432, 440. The trust declared in the benefit certificate was complete and specific, and needed neither supplement nor explanation.

Secondly, the claim rests on alleged conversations of deceased with Lillian and Emily, wherein, as they testified, he secured their consent to a change of beneficiary with the understanding that in the event of Florence’s death, the money would go to them. There is nothing to show that their consent was requisite; the papers, so far as printed, indicate the contrary. They had no vested right in thé fund at that time. Tepper v. Royal Arca num, 59 N. J. Eq. 321, reversed on another ground, 61 N. J. Eq. 638; Spengler v. Spengler, 65 N. J. Eq. 176. Hence, their “consent” involved no surrender of right, was inoperative as a consideration, and the declaration by deceased that the money should go to them in a certain contingency was no more chan a testamentary declaration not in compliance with the statute of wills.

Lastly, the testimony itself is unsatisfactory. The contingency, as stated by the sister Emily (Mrs. Haws), is “that at any time anything should happen whereby Florence should -not get this money, that it 'should revert to- my sister and myself as the policy had originally stood.” Mrs. Rutzler testified that her father thought that as she and Mrs. Haws were married (they were not married when the first certificate was'issued), it was fair to look after the unmarried, sister, and therefore was

“changed to her .with me as trustee to look after the fund in case anything happened to my father.
“Q. Now, in case anything happened to Florence, did your father give you any instructions as to what you were to do with this money that you would receive as trustee?' * * *
“A. It was to revert back to my sister and myself (in) egual shares.”

We agree with the learned vice-chancellor that what the father intended, if this testimony be taken as true, was that the money should go to the two sisters if Florence predeceased him. It would be strange, indeed, if the death of Florence, after she became beneficial owner of the fund, and on coming of age entitled -to collect it of Lillian, should defeat the trust as expressed in writing. The evidence must be clear and explicit. Perry Trusts § 77. This evidence is neither, on the specific question.

We conclude, therefore, that the money was lawfully paid to the administratrix, and that the two sisters have no title thereto except as next of kin of Florence. This makes it unnecessary to discuss the part of the decree below which declares the complainant subrogated to the rights of the administratrix to claim from Lillian as trustee all moneys lawfully expended for last sickness, funeral expenses and other charges for which the estate of Florence was liable. The decree below should be modified so as to adjudge that on the death of ’Florence her personal representative was entitled to have and receive as such the entire fund 'from the trustee upon its receipt from the complainant, and that the payment directly from complainant to the administratrix operated to discharge the trustee of and from all further obligation in respect to said trust.

Costs were properly awarded to complainant below. There was only one lawful purpose for which the'trustee could have received the money after Florence’s death, and that was to pay it to her administratrix. Not having been done directly, an attempt by the trustee to make the complainant pay it over again was merely litigious and futile.

■ With the modification outlined above, the decree of the court of chancery will be affirmed.

For affirmance—Ti-ie Chief-Justice, Garrison, Swayze, Trenchard, Parker, Bergen, Minturn, Kalisci-i, Black, White, Heppenheimer, Williams, Gardner—13.

For reversal—None.


author: Minturn, J.

text:
    Florence E. Palmer, respondent, v. Niagara Fire Insurance Company, appellant.
    [Argued November Term, 1916.
    Decided November Term, 1916.]
    Where tlie owner of mortgaged -premises, procured a policy of insurance, in her name, with the usual mortgagee clause contained therein, and after a fire the company paid to the mortgagee the amount of the mortgage, and took an assignment of the mortgagee’s interest in, the bond and mortgage, as well as an assignment of a final decree on foreclosure, of the mortgaged- premises, and proceeded to enforce the decree— Held, that the owner of the equity of redemption was entitled to a credit upon the decree, to the extent of the pro rata share which the company would have been obliged to pay to the mortgagor, upon an adjustment of the loss between the company and its co-insurers.

      On appeal from the court of chancery.

      Mr. William A. Reibel,-for the respondent.

      Messrs. Linddbury, Depue & Fondles, for the appellant.
   The opinion of the court was delivered by

Minturn, J.

The complainant was owner of real estate in Elizabeth. On March 11th, 1911, she executed a bond and mortgage thereon to John A. McFadden, as guardian, to secure payment of $3,500. She procured insurance on the property from three companies, aggregating $14,500, among which was a policy from the Niagara Fire Insurance Company for $3,500. This was the only policy containing the usual standard mortgagee clause, with a right of subrogation upon payment of the amount due to the mortgagee. The latter foreclosed his mortgage, and on December 18th, 1913, obtained a decree' for $3,225, with interest. A fire occurred on December 20th, 1912, completely destroying the insured premises. Suit at law upon the other policies required the Scottish Insurance Company to pay complainant $2,460 for its proportion of the loss, and the Northern Insurance Company 'to pay $2,150 for its share.

The proportion which the Niagara company would have had to pay to the complainant, under a policy devoid of the mortgagee clause, as its contribution to the loss was conceded to be $1,388.16. Having paid the mortgagee his full claim of $3,-416.67, it now insists that so far as this complainant is concerned, it has overpaid upon the policy the difference between its proportionate share of liability, under a policy devoid of the mortgagee clause, and its actual payment to the mortgagee, viz., $2,028.51, and to that extent it claims the right to exercise and enforce its privilege of subrogation. To that end it obtained from the mortgagee an assignment of his securities and final decree, and an agreement of subrogation, and in the attempt to enforce its claim is opposed by the complainant who filed this bill to enjoin the insurance company from enforcing its demand.

The bill also seeks to compel the surrender of the bond and mortgage for cancellation, as well as to compel the company to pay to the complainant the difference between the face of the policy and the amount paid to the mortgagee. The insurance was effected .by the complainant, at her own expense, payable to her subject to the usual mortgagee clause. It must be obvious that the claim of the complainant, if acceded to, would result in her enrichment by this investment, over and above her loss, to the extent of $2,770.85; and since fire insurance is conceded to be a method of indemnity for loss, and not a 'Speculation for gain or gamble, the effort to reconcile these conflicting claims upon equitable principles must be pursued with that fundamental doctrine in mind. Insurance Company v. Bailey, 13 Wall. (U. S.) 616; Fire Association v. Schellenger, 83 N. J. Eq. 144.

The rights of the mortgagee, and the. status of the mortgagor, under this policy, were radically different, so far as the liability of the company is concerned.

In the former case its liability was co-extensive with the amount of the mortgage, where the policy was sufficiently large to cover it, not exceeding the liability of the company to the mortgagor. Eddy v. L. A. Corporation, 143 N. Y. 311; Franklin Savings Inst. v. Central Insurance Co., 119 Mass. 240.

In the latter instance,- the extent of the company’s liability depended upon the extent to which all co-insurers under the clause for that purpose were legally obligated to contribute to the loss. Wiggin v. Suffolk Insurance Co., 18 Pick. (Mass.) 145; 14 R. C. L. 482, and cases cited.

This latter amount having been determined, the liability of the company to the mortgagor must be accordingly limited, regardless of what might be its liability to the mortgagee.

The result is that the limit of the complainant’s recovery, upon the policy, in a court of law, would be the company’s pro rata share of the total loss, based upon the co-insurance clause of the policy. It is apparent, therefore, that the two liabilities inherent in the policy are totally distinct and independent, and productive of different results in each instance. Hastings v. Westchester Fire Insurance Co., 73 N. Y. 141.

The rights of the mortgagor must be determined, not by the claim of the mortgagee upon the policy, but by the legal right accorded to the mortgagor; and upon that principle only can the liability of the company in this instance be predicated.

The right of the company to be subrogated, to the rights of the mortgagee, under the provisions of the policy being manifest (Hare v. Headley, 54 N. J. Eq. 545), the equitable doctrine of subrogation must be so effectuated, as to do equity between the parties according to their legal rights, as herein indicated, by crediting upon the decree the sum which the complainant would be entitled to receive from the-company, under the co-insurance provision of the policy, with interest.

To that extent the decree appealed from will be modified and in other respects reversed.

For affirmance—None.,

For reversal—The Ci-iiee-Justice, Garrison, Swayze, TrenCi-iard, Parker, Bergen, Minturn, Kalisoh, Black, Wi-iite, PIeppenheimer, Williams, Gardner—13.


author: Kausoi-i, J.

text:
    Alexander B. Shaw, complainant-respondent, v. Standard Piano Company, a corporation of the State of New Jersey, defendant-appellant.
    [Argued July, 1916.
    Decided March 5th, 1917.]
    1. The provision in P. L. 1912 p. 535 for the appointment of a receiver without notice is in, conflict with the constitutional inhibition against .taking of property without due process of law.
    ’ 2. As this provision is separable from, the rest of the act, its invalidity will not carry with it the remainder of the act.

      3. Where a corporation appeared to the suit, filed its answer and answering affidavits, proceeded to a hearing on-the meritorious questions as to its insolvency and the appointment of a receiver, and there was a finding, by the court, upon ample testimony that the corporation was insolvent and the appointment of a statutory receiver necessary—Held, that the appointment, by the court, of such receiver theretofore made without notice afforded no proper ground for complaint, since it appeared that the corporation was not aggrieved thereby.
    4. Until bankruptcy proceedings are actually begun, no attack can be made against insolvency proceedings in this court, on the ground that the Bankruptcy act is paramount.
    On appeal from a decree of the court of chancery, reported in 86 K. J. Eq. 137.

      Mr. Frank E. Bradner, for the appellant.

      Messn. Pitney, llcurdin & Skinner (Mr. Joseph Weissenbach, of the Illinois bar, and Mr. Oorwin Howell on the brief), for the respondent.
   The opinion of the court was delivered by

Kausoi-i, J.

The respondent filed his bill in the court of chancery praying that the appellant company be declared insolvent and be restrained from exercising any of its franchises, and from receiving any debts due to it, and from continuing its business and for the appointment of a receiver. '

The facts set out in the bill were verified, not by the complainant, but by one Leon J. Kelley, who was at the time treasurer of the appellant company, and who it appears- was familiar with and had knowledge of its business affairs and financial condition. .

On the presentation and filing of the bill on the 26th day of January, 1916, and without notice to the appellant, the late Vice-Chancellor Howell advised an order declaring the appellant company insolvent, and without funds to continue its business with safety to the public and advantage to its stockholders, and for the issuance of an injunction against and the appointment of a receiver of the appellant company pursuant to the prayer of the bill. The order advised further recites, among other things, that the urgency of the case having required the appoint- • ment of a receiver, without notice to the creditors and stockholders of the appellant company, that such creditors and stockholders have leave to apply to the court of chancery, on Tuesday, the 8th day of February, 1916, without further notice, for the removal of the receiver above set forth and the appointment of another additional receiver.

The appellant company gave notice of an application to be made by it to the court of chancery to vacate the order appointing a' receiver and for leave to file an answer and affidavits, and to discharge the receiver. The appellant company filed its answer with answering affidavits to the bill of complaint. Depositions were taken by the parties to the litigation and testimony was taken before the vice-chancellor; the meritorious questions in dispute were fully tried out and argued, with the result that on the 21st day of February, 1916, the court denied the appellant’s application to open the decree of insolvency and discharge the receiver.

From the order made by the court of chancery declaring the appellant company insolvent and appointing a receiver without notice, and from the order denying the appellant’s application to open the decree of insolvency and discharge the receiver, the appellant company appeals to this court.

Although we have arrived at the result that the decree of the court of chancery should be affirmed on the opinion of Vice-Chancellor Foster, reported in 97 Atl. Rep. 281, we find it imperative to point out that that part of the opinion which deals with the question of the appointment of a receiver, under the statute, upon the theory that such an appointment may be properly made upon the presentation of a verified bill showing a necessity therefor, without notice to the defendant does not meet with our sanction.

The learned vice-chancellor relies on section 65 of the Corporation act of 1896 (P. L. 1896 p. 298), as amended by the act of 1912 (P. L. 1912 p. 585), and on a long-continued practice in the court of chancery under this section as authorizing the appointment of a receiver without notice to the defendant. It is obvious from-a plain reading of the section referred to that it attempts to confer such power on the court of chancery, as was exercised in the present case, but it needs no argument to demonstrate that the exercise of such a power is in direct conflict with the constitutional inhibition against the taking of the property of another without due process of law. •

That the appointment of a receiver without affording the defendant an opportunity to he heard upon the application was a taking of its property without due process of law is manifest when it is considered that section 68 of the Corporation .act provides that all the real and personal property of an insolvent corporation wheresoever situated and all its franchises, rights, privileges and effects shall, upon the appointment of a receiver, forthwith vest in him, and that the corporation shall be divested of all title thereto.

We, therefore, conclude that the provision in section 65 of the Corporation act authorizing the appointment of a receiver without notice to the defendant corporation is unconstitutional.

But since it appears that this provision is separable from the other provisions of this section, it may be excised therefrom, without affecting the validity of the other provisions contained therein. See State v. Corson, 67 N. J. Law 187, and cases there cited; Schwarz Brothers Co. v. Board of Health, 84 N. J. Law 739.

The appellant, however, cannot derive any benefit from the result reached on this branch of the case, because it does not appear that it was in anywise aggrieved by the procedure pursued as to the appointment of the receiver, and herein condemned as improper.- The appellant appeared to the suit, filed its answer and answering affidavits, proceeded to a hearing on the meritorious questions as to its insolvency and the appointment of a receiver, and it appears that -there was ample testimony before the vice-chancellor which afforded a reasonable basis to his findings that the appellant corporation was insolvent and the appointment of a receiver necessarjc

Another ■ point urged by counsel for appellant and which appears not to have been dealt with in the opinion of the court below is, that the orders appealed from should be reversed because the Federal Bankruptcy act of 1898 has' suspended state insolvency laws, in so far as it operates upon the same subject-matters, persons and rights.

Counsel argues in support of this proposition that since both laws in the present case operate upon the same subject-matter, namely, the assets of the corporation; and the same persons, namely, the corporation and its creditors; and upon the same rights, namely, the pro rala distribution of assets among its creditors, the effect is that the state insolvency laws are suspended.

Undoubtedly;, this would be true if it had appeared that the jurisdiction of the federal bankruptcy court had been invoked, and since it appears that it was not, the question argued is not presented for decision.

The decree appealed from will be affirmed, with costs.

For affirmance—Tiie Chiee-Justice, Swayze, Trenohard, Parker, Bergen, Minturn, Kalisci-i, Brack, White, IIep-PENHEIMER, WILLIAMS, GARDNER—12.

For reversal—None.


author: Black, J.

text:
    Anna G. White, complainant and appellant, v. J. Louis White, defendant and respondent.
    [Argued November 22d, 1916.
    Decided March 5th, 1917.]
    The wife’s adultery, committed with the collusion or consent of the husband, is not such 'a “justifiable cause” within the meaning of. P. L. 7907 p. J/82 § 26j 2 Oomp- Stat. p. 2038, of the Divorce act, as will relieve the husband from the duty of supporting his wife.

      On appeal from the court of chancery.

      Messrs. Howe S Dams, for the complainant-appellant. •

      Messrs, hum, Tamblyn & Oolyer, for the defendant-respondent.
   The opinion of the court was delivered by

Black, J.

The record, in this case presents but a single problem for solution, wz., whether adultery committed by the wife with the collusion or consent of the husband is such a “justifiable cause” under section 26 of the Divorce act of 1907, page 482 (2 Comp. Stat. p. 2038), as relieves him from the duty of supporting her. The wife, in this case, filed a bill in the court of chancery against her husband, for suitable support and maintenance of herself and children. After a hearing in the court of chancery a decree was entered dismissing' the bill, on the ground, as stated by the learned vice-chancellor before whom the case was heard, of the adultery of the wife. The principle of law applied by the trial court was, that where the parties to a controversy are in pari delicio, tire court will not lend its aid to either, as long as the delinquency continues, citing with approval the ease of Hawkins v. Hawkins, 193 N. Y. 409, in the New York court of appeals.

We -do not agree with the conclusion reached by the court of chancery. The ease of Hawkins v. Hawkins, supra, is not applicable, as an authority in this case. First, because the statute under which it was decided is essentially different from the New Jersey statute. The New York statute (Code of Civil Procedure %J76S) provides, in such an action “the defendant may set up,” in justification, “the misconduct of the plaintiff,” while in our statute the words “justifiable cause” are used. That case turned upon a matter of statutory policy, as construed by the court. Second, the dominant fact in this case, viz., the collusion or consent of the husband to the wife’s adultery was absent in that case. There, the bare fact that each of the parties had committed adultery, stood alone, without collusion.

The record further shows in this case the husband filed a bill in the court of chancery against the wife, charging adultery. This bill for divorce by the husband was dismissed by the court of chancery and a divorce refused, the court holding, that although- the adultery by the wife was proved in the case, the adultery was committed with the collusion or consent of the husband. White v. White, 95 Atl. Rep. 197. The decree of the court of chancery was affirmed by this court. White v. White, 84 N. J. Eq. 512. The divorce statute;, under which'the bill was filed in this case by the wife, provides—

“in case a husband, without justifiable cause, shall abandon his wife or separate himself from her, and refuse or neglect to maintain and provide for her, it shall be lawful for the court of chancery to decree and-order such suitable support and maintenance.”

P. L. 1907 p. 482 § 26; 2 Comp. Stat. p. 2038. The decision of this case, therefore, turns upon the meaning and application of the words “justifiable cause.”

We think when the wife^s adultery is brought about by the collusion of the husband, or by his consent, the adultery of the wife in such a case is not that-justifiable cause which under the statute will relieve the husband from his duty of providing a suitable support and maintenance for his wife and children. She is still, in law, his wife, and has certain legal rights, one of which is a right of support from her husband, unless it ife cut off bjr the statute. In morals he cannot shield himself from tire ¡rqrformance of that duty, by his own wrongful conduct toward her, which helped to bring about her unfaithfulness.

It is not controverted, that the rights and obligations of the parties -in other respects, such as property rights, remain the same, unless modified by statute. The relation of husband and wife, though formed by contract, is something more than a contract. The husband and ‘wife cannot contract to disregard their marital obligations. They cannot contract to dissolve the relationship. The relation is always iregulated by government. Wade v. Kalbfleisch, 58 N. Y. 282. It would be both illogical and immoral to permit a husband to consent or to connive at his wife’s' adultery, and then permit him to use the adultery of his wife as a shield or excuse to shirk his duty to society, by relieving him from providing a support for her, under the guise of a “justifiable cause,” the result of his*collusion or consent. Justifiable means warrantable, defeneible. Thus, we speak of justifiable homicide, as a homicide without legal guilt, so, here, a justifiable cause, which will relieve the husband from his legal obligation to maintain and provide for his wife, is a cause, which he-has not helped to create, a result that has not been produced, in part,' at least, by his own misconduct, an adultery of the wife, free from legal guilt or connivance on his part.

The decree of the court of chancery is reversed, the case remitted to that court, to dispose of in accordance with the views expressed in this opinion.

For affirmance—None.

For reversal—The Chief-Justice, Garrison, Swayze, Trenohard, Parker, Bergen, Minturn, Kalisch, Black, White, Heppenheimer, Williams, Gardner—13.


author: Per Curiabi.

text:
    John W. Wescott, attorney-general, respondent, v. American Creosoting Company, appellant.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of the court of chancery advised bjr Vice-Chancellor Backes, whose opinion is reported in 86 N. J. Fq. 10Jf.

      Mr. John W. Wescott, attorney-general, for the respondent.

      Mr. Francis Lafferty, for the appellant.
   Per Curiabi.

The decree appealed from will be affirmed, for the reasons stated in the opinion filed in the court below by Vice-Chancellor Baekes.

For affirmance—The Ci-iiee-Justice, Garrison, Swayze, Trenoi-iard, Parker, Bergen, Minturn, Kalisch, Black, White, Hepeeni-ieimer, Williams, Gardner—13.

For reversal—None.


author: Per Curiam.

text:
    Max Morganstern et al., complainants-appellants, v. American Malting Company, defendant-respondent.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from an order of the court of chancery advised by Vice-Chancellor Stevenson.

      Messrs. Runyon & Auienreith, for the appellant.

      Messrs. Treacy & Milton, for the respondents.
   Per Curiam.

The complainants in this case seek by their bill to have annulled a resolution adopted by.the stockholders of the defendant corporation reducing its capital stock; and, further, a decree restraining the corporation from carrying the resolution into execution. The suit is not brought in the right of the corporation, nor for the benefit of all the stockholders thereof who should come in and join in its prosecution, but solely for the' protection of the individual rights of the several complainants.

The capital of the company at the time of the adoption of the resolution was $28,940,000, divided into one hundred and forty-four thousand four hundred shares of preferred stock and one hundred and forty-five thousand shares of common stock. The complainants are the holders of nine hundred shares of the latter. The resolution brought under scrutiny provided for the reduction of the authorized capital to $15,000,000. and for the purpose of' accomplishing that result cut down the preferred stock to ninety thousand shares, and the common to sixty thousand shares. At the meeting of the stockholders about ninety-eight per cent, of the holders of the preferred stock, and ninety-seven per cent, of the holders of the common stock voted in favor of the resolution.

The principal ground of objection made by the complainants to the proposed reduction was that by it the control of the company is transferred from the holders of the common stock to the holders of the preferred. But as the right of each of the stockholders, whether preferred or common, is the same, so far as the voting power of their holdings is concerned, the real injury to the complainants would seem to be that by putting the proposed scheme into execution they would receive less than their proportionate share of the whole issue of the stock. The defendant company, conceding for the purposes of the suit, that under the resolution the complainants would not receive their full proportion of the proposed new issue, offered at the hearing of the case to turn over to them so much of the new issue as would make their proportionate share thereof equal to their proportionate share of the old issue. The learned vice-chancellor, considering that this was all to which the complainants were entitled, advised an order that if the defendant’s offer should be carried out by it within a time to be specified in the order, and if the defendant would also give to the complainants a bond conditioned to save them harmless from any and all claims, demands or damages by reason of any assessment on the additional shares of the' stock, to be delivered in compliance with the offer, by reason of the non-payment in full of the par value thereof according to law, the order theretofore made, requiring the defendant company to show cause why the relief sought by the complainants should not be granted, be discharged.

The complainants now appeal from -the order made by the chancellor as thus advised.

We concur in the view of the learned vice-chancellor that the offer made by the defendant company at the hearing gives to the complainants everything-to which they are entitled as stockholders suing in their own right, when taken in connection with the requirement that an indemnity bond shall be given to them with the condition provided in the order. The effect of that order upon the rights of other stockholders is a matter with which this court is not now. concerned, as they are not present in court, except so far as the defendant company represents their interests; and, of course, if the proposed action of the corporation is hostile to the interests of other stockholders, then they have not had their day in court.

The defendant is entitled to costs in this court. The matter of costs and counsel fees in the court of chancery was held in abeyance by that court and should be settled therein.

The order under review will be affirmed.

For affirmance—The Oiiiee-Justice, Garrison, Swayze, Trencitard, Parker, Minturn, Tvalisci-i, Black, JIeppeniieimer, Williams—10.

For reversal—Bergen, Wi-iite, Gardner—3.


text:
    Sarah Irene Martin, petitioner-appellant, v. P. Bradley Martin, defendant-respondent.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    .On appeal from a decree of the court of chancery advised by Advisory Master Nelson B. Gaskill.

      Mr. Egbert Rosecrans, for the appellant.

      Mr. William H. Morrow, for the respondent.
   Per Curiam.

This is an appeal from a decree dismissing the petition of a wife for a divorce a mensa et thoro upon the ground of extreme cruelt}r. The specific charges made by her against her husband were gross abuse of marital rights, physical violence and unfounded accusation of adultery committed by her. These charges are supported by her-own testimony upon the witness-stand, but we fail to discover in our examination of the proofs sent up by the court below such corroboration of her story as the law requires in order to entitle her to the relief sought. Very little effort appears to have been made to produce such corroborating testimony, and that which was offered seems in the opinion of the advisory master not to have been entitled to much credit. It makes the same impression upon us, and we cannot, therefore, say that the dismissal of the petition was not justified by the proofs.

The decree under review will be affirmed.

For affirmance—The Chief-Justice, Garrison, Swayze, Trenchard, Parker, Bergen, Minturn/ Kaltscii, Black, WlITTE, PIePRENHEIMER, WILLIAMS, GARDNER-13.

For reversal—None.


text:
    M. Haupt Company, complainant-appellant, v. Board of Education of Edgewater, defendant-respondent.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of the court of chancery.

      Mr. William B. Madcay, Jr., for the complainant-appellant.

      Mr. Milton Demaresl and Mr. Abram DeBaun, for the defendant-respondent.
   Per Curiam.

The advisory master dismissed the bill because suit was not begun within ninety days after filing the lien as required by the act of March 30th, 1892. Comp. Stat. p. 3315. He relied upon the authority of Hermann v. Mexican Petroleum Corporation, 85 N. J. Eq. 367. Without expressing any opinion as to the correctness of the view taken by the learned vice-chancellor in that case, we think it enough to say that when a lien is claimed, the suit is not begun until the subpoena is taken out. The case is analogous to that of Haughwout v. Murphy, N. J. Eq. 531.

This view leads to an affirmance of the decree, with costs.

For affirmance—Ti-ie Ci-iiee-Justice, Garrison, Swayze, Trenchard, Parker, 'Bergen, Minturn,' Kallscit, Black, White, Heppeni-ieimer, Williams, Gardner—13.

For reversal—None.


text:
    Samuel H. Bowman, appellant, v. William M. Brown et al., respondents.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Stevens, whose opinion is reported in 87 N. J. Eq. 47.

      Messrs. Edward B. & Philip Goodell, for the appellant.

      Messrs. Helm, & Ready, for the respondents.
   Per Curiam.

The decree -appealed from will be affirmed, for the reasons stated in the opinion filed in the court below by Vice-Chancellor Stevens.

For affirmance—Ti-ie Ci-iiee-Justice, Garrison, Swayze, Trenchakd, Parker, Bergen, Minturn, Kalisch, Black, White; Heppenheimbr, Williams, Gardner—13.

.For reversal—None.


text:
    William Bensel, respondent, v. William O. Anderson et al., appellants.
    [Argued June 30th, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of tlie court of chancery advised by Vice-Chancellor Backes,'whose opinion’is reported in 85 N. J. Bq. 891.

      Mr. Aaron V. Dawes and Mr. James J. McGoogan, for the complainant-respondent.

      Mr. Frank S. Katzenbach, Jr., and Mr. Frederic B. Brace, for the defendant Anderson, appellant.
   Per Curiam.

We agree with the reasoning of the learned vice-chancellor and in the main with his result. The decree relieves’ Bensel of his liability on the note of $4,650, which existed prior to the arrangement now declared void. He ought not to profit by an agreement he repudiates, and equity requires that the situation existing when that agreement was made, should, as far as possible, be restored. This can be done by so modifying the decree that the bank may proceed on its judgment for $5,443.79 primarily against Bensel to the extent of $4,650, with interest from the date from which interest was calculated in entering the judgment, and the costs of suit, and requiring it to proceed primarily against Anderson for the balance; and by requiring Anderson to s'atisfy that balance and cancel the judgment upon the payment by Bensel or out of his property of the $4,650, interest thereon and costs included in the bank’s judgment.

Let the record be remitted to the court of chancery in order that the decree may be thus modified.

For affirmance—None.

For reversal—Garrison, Black, Wi-iite—3.

For modification—The Chief-Justice, Swayze, Trenchard, Parker, Bergen, Minturn, Heppenheimer, Williams—8.


text:
    Frank B. Allen, executor, &c., appellant-respondent, v. Harriet E. Moore et al., appellants-respondents.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Poster, whose opinion is reported in 86 ■N. J. Eq. 357.

      Mr. Alfred F. Stevens, for the complainant.

      Mr. Benjamin J. Fleuchaus, Messrs. Pitney, Hcurdim, & Skinner and Messrs. McCarter & English, for the defendants.
   Per Curiam.

The decree appealed from will be affirmed, for the reasons stated in the opinion filed in the court below by Vice-Chancellor Poster.

'For affirmance—The Chiee-Justice, Garrison, Swayze, Trenchakd, Parker, Bergen, Minturn, Black, White, HepPENHEIMER, WILLIAMS, GARDNER--12.

For reversal—None.


text:
    John Dimler, complainant-appellant, v. Caroline Caldwell et al., defendants-respondents.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Emery, who filed the following opinion:
    “In this case I conclude that the complainant has failed to establish satisfactorily that there was a mistake in the making of the deed in question to his wife, Barbara Dimler, as the sole grantee.
    “As to the mistake in the deed, according to complainant’s own evidence, which is corroborated by the appearance of the deed itself, the deed was originally drawn to him as sole grantee, and by reason of directions given at the time of its execution, by himself to the lawyer who drew the deed, it was changed in respect to the party grantee. On the face of it, it appears to have been changed by the erasure of his Christian name (John) as grantee, both in the deed and its endorsement, and by writing over the erasure ‘Barbara,’ his wife;s Christian name. 'The. word ‘his’ throughout the deed was also erased wherever used and ‘her’ written over the erasure. Complainant’s present statement, made years after the death of the lawyer who drew the deed, and of all the other parties interested, is substantially that he directed the lawyer to put his wife’s name in, but said nothing about taking his name out, and supposed both- names were in.
    “Ilis evidence at this time cannot, under the circumstances, be considered as sufficient to overcome the effect of the transaction as actually carried out by the scrivener and by the grantor. The utmost effect of it, if believed, is to show a misapprehension of the directions he then gave, or intended to give, not a mistake of all the parties in the execution of the deed.

      “Nor has the complainant established that the cash paid at the time of the conveyance ($700) was from his own money and was not the proceeds of property belonging to his wife. The deed, therefore, should not be reformed, according to the special prayer of the bill, neither should a resulting trust be declared as arising at the time of the conveyance from the payment by him of the purchase-money, as was argued at the hearing.
    “But inasmuch as the evidence shows that of the total purchase-money ($2,200), the amount of cash paid was $700 (paid from the proceeds of money procured by the sale of a mortgage standing in the wife’s name), and that for the balance of the purchase-money the wife personally assumed a mortgage of $1,-500, for which the husband did not become at all responsible, but which he subsequently paid off, the further question arises whether the husband may not be entitled to a charge on the lands for the reimbursement of this payment in discharge of the wife’s lands. The original transaction—the conveyance to the. wife—was not, under the evidence, a gift by the husband, or a purchase upon a resulting trust, but a conveyance to the wife of property purchased by her own moneys and obligations, for which the husband was not responsible. Whether, under the evidence in this case, the husband’s subsequent payment of the mortgage is to be considered as entitling him to a charge on the lands, is a question upon which I desire to hear counsel further.
    “The bill alleges this subsequent payment of- the mortgage on the wife’s lands by the husband, and that, when it was paid, he supposed the title was in the name of both. The prayer for general relief would seem to be sufficient to cover the charge for the payment, if, under the evidence, he is entitled to it.”

      Mr. William B. Wilson, for the complainant.

      Mr. Sidney W. Eldridge• and Mr. Louis A. Ziegler, for the defendants.
   Per Curiam.

So far as concerns the title to the property we agree with Vice-Chancellor Emery and the chancellor. So far as the decree adjudges that the complainant is entitled to a lien for $750 and interest, we have assumed its correctness, since there is no appeal by the defendants from that part of tire decree, and the complainant is not aggrieved thereby. The decree is affirmed, with costs.

For affirmance—Ti-ib Ci-iiee-Justioe, Garrison, Swayze, Trejstohard, Parker, Bergen, Minturn, Kalisch, Black, Heppeni-ieimer, Williams, Gardner—12.

For reversal—None.


text:
    In the matter of the estate of Hannah Bowdoin, deceased.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    On appeal from a decree of the prerogative court advised by Y.ice-Ordinary Backes, who filed the following opinion:
    “The facts are fully set forth in the opinion of Judg'S Connolly, filed in the orphans court, and I concur in the conclusions arrived at by him.
    “The indenture by which the appellant was bound to the deceased and her late husband, in 1866, by the American Female Guardian Society, was'for a term of years only and expired by its own limitation. The form of the indenture is similar to the one found in IS N. J. Eq. SS8&. The language relating to adoption simply characterized the sentiment of the relation thereby created. Wallace Estate, ®18 Pa. St. 89. .

    “Assuming that the -society had authority under its charter to grant adoption of its wards, and also that the New York-Adoption act of 1873 recognized and confirmed such adoptions, it is plain to be seen that the society did not execute the power, and, consequently, the indenture was not within the purview of the later legislation. Clearly, the provisions of the act were intended to embrace adoptions of a lasting nature only, and of such only those that were made by sanction of law.

      “Furthermore, when the Adoption act was passed in 1873, the parties were domiciled in New Jersey and their status as fixed by the contract, viz.; that of master and apprentice, remained unaffected by the statute of New York. And, when the amendment to the Adoption act was enacted in 1887, adding the right of inheritance, the relation between the appellant and the deceased had long since been dissolved by expiration of time. Each had fully performed the terms of the indenture, and after the appellant had acknowledged in writing her satisfaction,' called a release, she went her way. Ross v. Ross, 129 Mass. 21¡S, is an instructive opinion by Chief-Jüstice Gray upon the principle that the heritable status of a person is fixed by the law of the doinieile.
    “Other questions raised on the argument and in the brief of respondent’s counsel, concerning the disability of the deceased, a married woman, to join with her husband in the indenture; the sufficiency of its execution by the society; whether tl'ie contract was executed in New York or in this state, and others, are all subordinate to the view expressed in' the opinion below and here entertained, and therefore have not been examined and are not passed upon.
    “The decree below will be affirmed, with costs.”

      Messrs. Tail cG McLean, for the appellant.

      Mr. William C. Webb, Mr. Adolph Ulbrich, Mr. Charles F. Edsall and Messrs. Treeland é Wilson, for the respondents. ■
   Per Curiam.

The decree appealed from will be affirmed, for 'the reasons stated in the opinion filed in the court below by Vice-Ordinary Backes.

For affirmance—The Chief-Justice, Garrison, Swayze, Trenojiard, Parker, Bergen, Minturn, Kalisoh, Black, White, IPeppeni-ieimer, Williams, Gardner—13.

For reversal—None.


text:
    John L. Smith, appellant, v. Eli Smith et al., respondents.
    [Submitted November Term, 1916.
    Decided March 5th, 1917.]
    •On appeal from a decree of the court of chancery advised by Vice-Chancellor Backes, who filed the following opinion:.
    ■ “This ig a bill for the specific performance of a contract to convey land. The parties to the suit are brothers. On October 12th, 1905, they entered into an agreement whereby the defendant agreed to sell to the complainant his farm in Hunterdon county for $2,350, of which $500' was to be paid ‘at any time within five years,’ and 'the balance to be secured by a purchase-money mortgage. It was further stipulated
    “ ‘that the said John Ij. Smith [complainant] shall occupy said farm from the date of this agreement and shall pay as rental for the same the interest on $2,350 from the 27th day of February, one thousand nine hun'dred- and five, payable annually, and shall also pay all taxes and insurance up to the time the $500 shall, be paid and deed given * * * and until such date keep the buildings and fences in good repair, the bushes cut along' the fences, and farm the land in a good and husbandlike manner.’
    “The right of re-entry was reserved upon a sixty-day default in the payment of the interest, taxes or insurance. -The complainant entered into possession of the farm, and during tiie five years defaulted to the' extent of $280 in the payment of rental and also within the time limited failed to make the payment of $500, and to execute the mortgage as agreed. He claims that performance was waived and the time extended indefinitely by the defendant, and in support testifies that-before the time was up he told the defendant that he had arranged to borrow the $500 purchase price from one Fitzgibbon, and that lie was ready to execute the bond and mortgage; that the defendant told him there was no use doing that; that he clid not need the money just then; that the complainant might as well pay him interest as to pay Eitzgibbon, and that he was willing to let the agreement run on. The defendant denies this, relating that he had given the complainant until the spring of 1911 to pay the $500, at which time the complainant came to him, in the preserve of his wife and son, and stated that he had no money and could borrow none, and would have to give up the purchase of the farm, to which the defendant says he replied that if the complainant wanted to he could go on and stay and pay the interest the same as rental until he (the defendant) wanted to use the place. The wife gives substantially the same storjr, and the son, in all material respects, corroborates his parents, adding that his father told his uncle That if he could not get the money he could live on there, but the agreement expired, and under the same condition to pay that interest as rental.’
    “I am inclined to believe that the complainant has forgotten and is mistaken in' what occurred; that the defendant’s version is correct and that the understanding of the two brothers was that the sales contract had come to an end, and that the complainant was. to remain as a tenant upon the pajment of $141 per annum, interest on $2,350, as rental. As matters stood, and as both parties then reflected upon the past and contemplated the future, the prospect of the complainant raising the $500 was hopeless. The defendant was kindly disposed towards his brother, and had evidently tried to help him along by letting him in on the farm on very easy terms. It may be inferred that both thought the complainant could save at least $100 a year in five years, so as to make the cash payment on or before the expiration of that time, but he was unsuccessful, and his finances were always in a precarious condition. When the five years were" up, in addition to his default in the rental, the complainant was indebted to the defendant to the amount of $200 for money borrowed, and, besides, during all that time the defendant relieved him from the payment of the taxes on the farm, and to me it seems but natural that in these circumstances the complainant, in despair, gave .up -all hope and surrendered his right to purchase. 1 cannot believe that he offered, and that he was able to pay, the $500, for his financial affairs were such as to make it unlikely that any person would lend him that sum without security, and he liad none to give. The Mr. Fitzgibbon, from whom the complainant says he had arranged to borrow the money, is dead. What inducement was held out to him to lend the complainant the $500 is not disclosed, nor do I recall any testimony indicating that if he had agreed to lend the money that it was to be lent without security. Later circumstances also indicate pretty clearly that the tenure of the complainant was that of a tenant and not as the holder of an option under the agreement, and that he so understood. In January, 1915, he remarked to Percy L. Smith, another of defendant’s sons, that he supposed he would have to get off the farm in the spring, and that the defendant would put him off-—meaning, therebjq that a son of the defendant had then recently married and he would want the farm for his son. Later, in the same month, the defendant gave an option to a party to buy the farm and sent for the complainant and told him, so he testified, that he had a chance to sell, to which the complainant replied that- it was the best thing that he could do, and that he, the complainant, had been ready to quit and get off the farm for the last two years, but did not want to use the defendant mean and leave the farm. And, further, that he told his brother he would give him $1,000 to vacate in the spring if the party holding the option took the place; that the brother seemed well pleased and thought he was doing a nice thing. He further said, so he testified, that he told the complainant if the party did not take the farm he could stay on for another j^ear and pay rent, and then the defendant wanted the farm himself. This incident is also testified to by another son of the defendant. About the same time the complainant expressed himself to one Bigelow, a disinterested and reliable witness, as pleased with the sale and the anticipation of getting $1,000 from his brother.
    “In arriving at my conclusion, I am asked -by the counsel of the complainant to discredit the defendant’s testimony and that of his wife and three sons, on the ground of their interest in the subject-matter. This I cannot do. -Their interest is no greater than that of the complainant. They are quite as reputable, at.least as far as appearances go, as the complainant is, and their testimony was given in a manner straightforward and convincing. The complainant’s testimony stands alone, against the words of the defendant, his family and the witness Bigelow, and viewed in this aspect it is overwhelmed. But his counsel argues that there are undisputed circumstances in the case to which he refers, which overcome and overthrow all the defendant’s evidence, and to a degree satisfactory to the mind, that his client alone related the exact truth. There is testimony that during the complainant’s possession he made some improvements by clearing the farm of some rock, building fences, a hog house and a kitchen, putting shingles on the wagon house, foundation under two houses; building a concrete trough, removing dead trees, &e., all with the knowledge of the defendant. -Just to what extent these improvements were made during the first five years, and those afterwards, was not made altogether clear by the testimony, but it does appear that the rock, and, as I recall it, the stone fences, which were replaced by barbed wire, were carried away and profitably sold by the complainant. The testimony does not satisfy me that what he did on the place was otherwise than consistent with his status as a possible owner during the first five years of his occupation and as tenant thereafter.
    “Another matter referred to is the fact that there was endorsed on the contract of sale the receipts of the rentals as ‘interest on the within contract.’ This characterization of the moneys continued after the expiration of five years, and from this complainant’s counsel argues that the reasonable inference is an acknowledgment by the defendant- that the option agreement continued. This point suggested itself to my mind during the course of the trial, and I examined Mrs. Smith critically and at some length regarding.it, and her explanation was that she ignorantly followed the form of the first endorsement, which ■ was evidently written by someone else. Obviously, the word interest’ in the receipts, even in the first form, was a misnomer, because it appears by the contract that the amount of interest on the purchase price was to be paid as a rental.
    “The next thing to which my attention is called is that when the defendant gave the option, he offered the complainant $1,-000 to vacate, if the sale were consummated, and it is urged that this was recognition of the complainant’s ownership. But 1 cannot look upon it in that sense. The contemporaneous circumstances were these: One Del Fuga Giero was about to promote a manufacturing concern in the borough of Hampton, where this farm, or part of it, lies, and for that purpose took the option to purchase from the defendant at the price of $7,000. It was not contended upon the argument that that was a fair price for the place for farming purposes, and, indeed, it does not appear that it was worth very much more than the purchase price in the present contract. The inflation was entirely due to the supposed demand for the property and the option. And, as it impresses me, the defendant felt that he could well afford to be generous to his brother if the deal should be carried through, and he should facilitate its consummation by a ready surrender of possession. A handsome price was in prospect from the sale of this unprofitable farm, and it would have, been good business policy to have made the offer, even if these brothers had been strangers, in order to remove a seeming obstacle to a quick sale. Aside from this, however, my notion is that the defendant was moved to make the offer in a spirit of fair play and justice towards his brother, who, by his labors, had in some degree, though slight, contributed'to enhance the value of the farm; but his conduct ought not to be distorted so as to make it appear to have been an acknowledgment of the complainant’s claim as optionee.
    “The view I entertain makes it unnecessary to determine, and also wholly immaterial whether the agreement was one of sale with deferred execution, or a tenant’s option to purchase, and whether time was of the essence of the contract. I haye treated the case as one of facts, and the facts I find in favor of ihe defendant. The bill will be dismissed, with costs.”

      Mr. Herbert Ciarle Gilson, for the appellant.

      Mr. Harry L. Stout, for the respondents.
   Per Curiam.

The decree appealed from will be affirmed, for the reasons stated in the opinion filed in the court below by Vice-Chancellor Baekes.

For affirmance—The Chief-Justice, Garrison, Swayze, Trenohard, Parker, Bergen, Minturn, ' Kaliscii, Black, White, Hepreni-ieimer, Williams, Gardner—13.

For reversal—None.