author: Van Syckel, J.

text:
    Sarah C. Smith et al., complainants and respondents, v. Dodge & Bliss Company et al., defendants and appellants.
    [Filed November 21st, 1899.]
    1. The inchoate lien acquired by materialmen and workmen under the third section of the Mechanics’ Lien law, as amended by the second section of the act of March 14th, 1895 (Gen. Stat. p. 2073), cannot, by force of the fifth section of the latter act, be impaired or defeated by an advance payment on the contract price or by a secret arrangement between the contractor and owner, unless such arrangement is authorized and provided for in the contract as filed.
    2. Those who serve stop orders, under the statute, are entitled to be paid in the order of priority in which notices are served and not pro rata.

    On appeal from a decree advised by Vice-Chancellor Pitney.

      Mr. Joseph Anderson and Mr. Henry J. Melosh, for the respondents.

      Mr. James F. Fielder, for the appellants.
   The opinion of the court was delivered by

Van Syckel, J.

The controversy in this case arises under the Mechanics’ Lien law, in regard to materials furnished to one Anderson, a contractor, and used by him in the erection of a building for Sarah C. Smith, the complainant, under a contract duly filed.

The Dodge & Bliss Company claim the money payable under the contract to the contractor, Anderson, by virtue of notice served, under the third section of the Mechanics’ Lien law. Gen. Stat. p. 2073 pl. 38.

The Barnes Manufacturing Company claims the money under an order of which the following is a copy :

“ Jersey City, Nov. 19th, ’97.
“The Barnes Manufacturing Co., West End, Jersey City, N. J.;
“ Gentlemen — Please deliver, to A. A. Anderson, at my frame building, brick cellar, corner Boulevard and Mandeville avenue, Jersey City, N. J., now being erected by him for me, the frames, sash, blinds and doors, as ordered by him at the price agreed, namely, seven hundred and ninety-seven dollars (§797.00), which sum I agree to pay to you out of moneys due or to grow due to me from him on said building and under his contract, and payments to be made as goods are delivered.
“ Yours truly,
“ Sarah C. Smith.”

In Slingerland v. Binns, 11 Dick. Ch. Rep. 413, in construing the effect of section 5 of the supplement to the Mechanics’ Lien 'law, approved March 14th, 1895, this court said: “Prior to the supplement this court had held that the contractor in a building contract was free to deal with his inchoate rights under the contract as he pleased, up to the moment when they were impounded by a notice given to the owner pursuant to the statute', and if, before the notice reached the owner, the contractor had assigned his rights, the notice was ineffectual. The basis of these decisions was that the statute gave the workmen and materialmen no claim whatever upon the moneys payable under the contract or upon the owner until the statutory notice was served. But plainly .this section of the law changes the situation. It expressly forbids the owner to pay any money in advance of the terms of the contract, if the effect may be that the amount unpaid will prove insufficient to satisfy notices served in conformity with the statute. In substance it directs that the owner shall not in any way discharge his liability to pay under the contract until, according to the terms of the contract, the time to do so has arrived, in order that until that time such liability may be preserved for the benefit of workmen and materialmen who serve the statutory notice. This enactment, we think, affords a reasonably clear indication of a legislative purpose to give to persons entitled to serve the statutory notice an inchoate lien upon the liability of the owner under the contract until that liability matures, according to the terms of the contract, such lien to become perfect on service of the notice before the liability matures, but to expire on such maturity if no notice has been given; for a notice served after maturity derives no aid from this provision.”

This interpretation of the statute was re-affirmed in Bayonne Building Association v. Williams, 43 Atl. Rep. 669.

It firmly establishes the doctrine that an inchoate lien under a filed contract attaches in favor of workmen and materialmen, which can be perfected and the lien firmly established in the order of priority in which stop notices are served, and that such inchoate right of materialmen and workmen cannot be impaired or defeated by the owner by making payment in advance of the terms of such contract.

It is a vested' right under the statute, and as such is secure as against the act of the owner. The statute is an assurance to materialmen and workmen that they may rely upon the terms of the contract as filed, and that there shall be no advance payment, and no secret arrangement between the contractor and ownermot authorized by the terms of the contract, by which any payment of money required thereby shall be withdrawn from the operation of a stop order before such payment matures.

It is obvious, therefore,' that the order given by Sarah C. Smith, the owner, to the Barnes company, cannot operate to diminish the sum in the hands of the owner under the terms of the contract, and thereby to defeat the inchoate lien of the materialman unless the contract itself reserves the right to the parties to it to change it at their option. In that event the materialman and workman must give credit to the contractor at their peril, and are without this inchoate right of lien, or more strictly speaking, are subject to have that right taken away by a change of the contract without their consent.

Does this contract reserve the. right to the contractor and owner, or either of them, to modify or change it, so far as to defeat the lien in this case?

The only provisions of the filed contract bearing upon the question of the reserved right to change it, are the following:

“Article 3. Should the owner, at any lime during the progress of the said building, request any alterations, deviations, additions or omissions from the said contract, she shall be at liberty to do so, and the same shall in no way affect or make void the contract, but will be added or deducted from the amount of the contract, as the case may be, by a fair and reasonable valuation.
“Article 4. Should the contractor, at any time during the progress of said works, refuse or neglect to supply a sufficiency of material or workmen, the owner shall have power to provide materials and workmen, after three days’ notice in writing being given, to finish the work, and the expense shall be deducted from the amount of said contract.”

Article 3 manifestly does not authorize the advance payment. It provides that the owner at any time during the progress of the building may request any alterations, deviations, additions or omissions from the contract.

According to Mrs. Smith’s own evidence she made no request for any change in the contract as filed, and the rights of the parties cannot be affected by this stipulation.

Article 4 is equally inoperative. It does not appear that the contractor at any time refused or neglected to supply material or workmen, or that the owner provided materials or workmen to finish the work.

The contractor had not abandoned the work at the time this order was given, and Mrs. Smith never took upon herself the burden of completing it. The case shows conclusively that there was no such understanding between the parties to the contract. The order was given by Mrs. Smith to the Barnes company long before the contractor became disabled to complete, the undertaking by reason of his financial difficulties. There is no evidence to justify a claim that he had refused or neglected to supply material or labor or that Mrs. Smith gave this order in the exercise of any right she had reserved under the fourth clause of the agreement filed. On the contrary, she says in her bill that she signed the order at the instance and request of the Barnes company. It must be regarded as an effort on the part of the Barnes company to gain an advantage over other creditors of the contractor, in contravention of the statute. If by such an arrangement as the order to the Barnes company the stop notices can be superseded and postponed in order of priority, the statute became virtually inoperative, and the inchoate lien, recognized and hitherto enforced, becomes a lien in. name and not in substance. Such an interpretation of the statute would be in utter disregard of both its letter and its spirit.

It is suggested that the stop orders lose nothing by reason of the fact that the fund to be distributed is not decreased because materials were furnished by the Barnes company which could not otherwise have been secured, ana the contract payment was thereby earned. There is no authority for such an assumption, and if justified it cannot affect the legal rights of the parties. The inchoate lien is not a lien on the building, but on the contract price remaining in the hands of the owner, and which the law holds there according to the terms of the contract. If by this secret arrangement one payment on the contract may be excluded from the operation and effect of the statute, every payment provided for in the contract might, at the very inception of the work, have been anticipated and diverted in the same way for the benefit of favored creditors, and the statute thus rendered entirely nugatory. Thereby the creditors who, as in this case, continued their credits to the contractor upon the belief that he would be entitled to the payments provided for in his contract, would be left without any fund upon which to impress their statutory lien.

The rights of those who served stop orders are superior to the claims of the Barnes company, and they must .be paid in the order of priority in which they were served and not pro rata.

.The decree below should be reversed and the case remitted to the court of chancery, that a distribution may there be made, in accordance with this opinion, of the $791.77 found by the court below to be the proper sum to be distributed out of the last payment under the contract.

For modification — The Chief-Justice, Van Syokel, Gummere, Lippincott, Bogert, Adams, Nixon, Vredenburgh — 8.

For affirmance — Dixon, Garrison, Ludlow, Collins, Hendrickson — 5.

For reversal — The Chief-Justice, Van Syckel,' Dixon, Garrison, Gummere, Ludlow, Collins,-Lippincott, Bogert, Hendrickson, Adams, Nixon, Vredenburgii — 13.


source: Caselaw Access Project

author: Dixon, J.

license: Public Domain

text:
    Catharine Schwarzwaelder, complainant and respondent, v. The German Mutual Fire Insurance Company of Newark, New Jersey, Frederick Tegen, Jr., . et al., defendants and appellants.
    [Filed November 20th, 1899.]
    1. At the suit of a member of a mutual insurance company, a preliminary injunction may be awarded to restrain the directors from changing the company into a joint stock company when the company itself has not taken the proceedings prescribed by the Insurance Companies act.
    2. The procedure for changing a mutual insurance company into a joint stock company, under that act, indicated.
    3. Under the amendment of the Insurance Companies act, which was passed March 6th, 1899, a mutual insurance company organized in 1893 cannot transform itself into a joint stock company against the will of a member who acquired membership by contract with the company, made before the passage of that amendment.
    On appeal from a decree advised by Vice-Chancellor Emery, whose opinion is reported in Schwarzwaelder v. Tegen, Jr., 13 Dick. Ch. Rep. 319.

      Mr. Thomas Anderson, for the complainant.

      Mr. Joseph A. Beecher and Mr. Frederick IT. Bum, for the defendants.
   The opinion of the court was delivered by

Dixon, J.

This appeal was taken from an order that a preliminary injunction issue to restrain the defendants, the German Mutual Fire Insurance Company of Newark, New Jersey, and its directors, from changing the corporation from a mutual company into a joint stock company, and from transacting business as a joint stock company.

The complainant is the holder of a policy issued to her by the company on April 12th, 1898, insuring her against loss by fire between April 20th, 1898, and April 20th, 1901, to the amount of $2,000, and as such she is a member of the corporation, entitled to vote at its meetings.

The first ground of appeal is that the complainant’s damage by the proposed change would not be irreparable, and therefore a preliminary injunction was improperly awarded.

But we think that in the equitable sense such damage is irreparable. The proposed change, if effected, would deprive the complainant of her membership in the company, for in a joint stock company only holders of shares of the capital stock are members. Neither the 'common law nor statutes furnish any adequate remedy in the courts of law for such a deprivation. A writ of 'mandamus could not be obtained to restore her to membership, for the corporation in which she is entitled to be a member would have practically ceased to exist. Nor would an action for damages be likely to afford just compensation, as there is no rule by which the value of her membership can be reasonably measured. In these conditions the wrong threatened is, in the view of a court of equity, irreparable. 3 Pom. Eq. Jur. § 1357.

But the complainant’s case may be well supported on another ground. ' It belongs to a class over which equitable cognizance is firmly established — cases where the directors of a corporation have adopted, or are about to adopt, some measure which is beyond the scope of their corporate authority, or in violation of the fiduciary duty which they owe to the members of the corporation. In such a case a single member, on his own behalf merely, or on behalf of himself and all others similarly situated, may prosecute a suit in equity against the directors, making the corporation a co-defendant, to obtain appropriate relief either by rescission or by prevention. 3 Pom. Eq. Jur. §§ 1093, 1345, and cases cited. This doctrine was enforced by the courts of New Jersey in Kean v. Johnson, 1 Stock. 401, and Black v. Delaware and Raritan Canal Co., 9 C. E. Gr. 455. In the latter case this court sustained a prayer for a preliminary injunction.

The next question is whether the proposed action is beyond the scope of the authority of the directors, under the circumstances which are admitted to exist.

The power to change a mutual insurance company into a joint stock company is one which, if possessed at all, must be derived from the statute. ' It is conferred in our legislation by the “Act to provide for the regulation and incorporation of insurance companies,” the revision of which was approved April 9th, 1875 (Gen. Stat. p. 1744), which, on this point, received its final form in the amendment of March 6th, 1899. P. L. of 1899 p. 17. The language is:

“Any of the mutual insurance companies chartered by the legislature of this state or organized under the general laws of this state may, after giving notice once in each week for six weeks, in a newspaper of this state published in the county where such company is located, change to joint stock companies by proceeding in accordance with and conforming their charier to the provisions of this act.”

The full meaning of this enactment is not very plain, but as to two matters its import is reasonably clear — -first, that the company can make the proposed change only after giving the prescribed notice; and second, that by “ the company ” is intended the corporation itself and not the directors, for, while to the directors is committed the management of the ordinary business of the company, yet it cannot be presumed that the legislature designed to entrust them with the power of effectuating this extraordinary measure, by which even the right of membership in the corporation would be destroyed.

The method of bringing about the change is declared to be “by proceeding in accordance with and conforming the charter to the provisions of the act.” When we examine the act, to discover the purport of this clause, we find that there are no provisions in accordance with which a corporation, as such, can proceed to form a charter or to organize a joint stock company; that such acts can be performed only by individuals, not less than thirteen in number.

Construing, the whole act together, the plan designed seems to be as follows: that the company, i. e., the members of the corporation, lawfully assembled at a regular meeting or at a special meeting duly called, should direct a notice to be given in the mode prescribed by the act, setting forth that at a time and place specified the proposition to change the mutual company into a joint stock company will be considered and acted upon by the corporation; that at the time and place specified the company should determine whether the proposed change ought to be made; that if the change be thus ordered, individuals not less than thirteen in number should be appointed, by the company to proceed, on its behalf and according to its directions, in the mode prescribed by the statute, to prepare and file the necessary declaration, to open books for subscriptions to the capital stock and to take such other steps as are requisite for the organization of a joint stock company.

That this course was not substantially adopted is admitted; nevertheless, the defendants thought themselves legally entitled to put the company on a joint stock footing and to transact business on that basis, and were proceeding to do so when the bill in this case was filed. This being in violation of the directors’ duty to the complainant as a member of the corporation, an injunction was properly awarded.

There is another aspect of the case which should be presented.

The power to change a mutual insurance company into a joint stock company was originally conferred by the act of March 10th, 1852 (P. L. of 1852 p. 159 § 16), in these words :

“Any of the mutual insurance companies already chartered by the legislature of this state, may, after giving ninety days’ notice in three of the public papers of this state, change to joint stock companies, by proceeding in accordance with and conforming their charter to the provisions of this act.”

At that time there was in the constitution of New Jersey no prohibition against the granting of exclusive privileges to corporations, and therefore the words of this enactment could have their natural meaning, uninfluenced by constitutional restriction. That meaning confines the granted privilege to companies “already chartered” — i. e., chartered before the act was passed. A mutual company thereafter chartered must obtain in its charter the power of transformation to possess it.' In exactly the same terms the legislature approved the law in the Revision of April 9th, 1875, when still such an act was constitutional. On April 27th, 1886, the section of which the above-quoted clause is part was amended, but this clause was not altered. P. L. qf 1886 p. 297. Under the constitution then in force an amended section must be recited at length in the amending act, but by observing this constitutional form of amending a section, the legislature does not express an intention then to enact the whole section as amended, but only an intention then to enact the change which is indicated. McLaughlin v. Newark, 28 Vr. 298; S. C. on error, 29 Vr. 202. A like principle is applied in the interpretation of a revision of laws. “The laws so adjusted,” said Chief-Justice Beasley, in Knight v. Freeholders of Ocean, 20 Vr. 485; “ are not to be deemed to have acquired any different efficacy from that possessed by them in their-original condition.” Hence, in the amendment of April 27th, 1886, the words “already chartered” were still incapable of being applied to companies subsequently chartered. On April 9th, 1888, the section was again amended, and in the clause now under consideration there were inserted, after the words “ already chartered by the legislature of this state,” the words “ or already organized under the laws of this state.” P. L. of 1888 p. 414. According to the principle just mentioned, the phrase “ already chartered ” cannot be deemed applicable to companies thereafter chartered, and, under the rule “ noscitur a sociis,” the phrase “already organized” cannot embrace companies thereafter organized. No other change was made in this section until the amendment of March 6th, 1899, first above quoted.

The German Mutual Fire Insurance Company was organized under our general laws, in 1893, and the complainant became a member of it in 1898. As we have seen, the company had then no power to change itself into a joint stock company. The complainant’s right to membership was one of the benefits accruing to her from her contract of insurance in the company. Of this benefit the company had no power to deprive her, except in the mode provided by the contract itself. The act of March 6th, 1899, if enforced against the complainant, would impair the obligation of her contract by enabling the company to take from her a right derived from her contract with it, in a method not authorized by the contract. Such a law would be unconstitutional and void. Although the act under which the company was organized is subject to amendment, alteration and repeal by the legislature, yet such amendment, alteration or repeal can be effected only by the legislative power of that body, and its legislative power does not extend to the enactment of a law which impairs the obligation of a legal contract previously made. Rahway v. Munday, 15 Vr. 395.

We are therefore of opinion that the defendant company has no power to transform itself into a joint stock company against the will of any member who acquired the right of membership before the act of March 6th, 1899, was passed.

The order appealed from is affirmed.

For affirmance — The Chief-Justice, Depue, Dixon, Garrison, Gummere, Ludlow, Collins, Bogert, Hendrickson, Adams, Nixon, Vredenburgh — 12.

For reversal — None.


text:
    George S. Duryee, commissioner, &c., complainant, United States Credit System Company, defendant. James Talcott, appellant, v. George R. Gray, receiver of said defendant company, respondent.
    [Filed March 6th, 1899.]
    A certificate of guarantee issued by the United States Credit System Company construed in certain respects.
    On appeal.
    Incorporated 1888.
    No. 2,377-9. 515,000.
    United States Ceedit System Company, Of Newark, N. J,
    Copyrighted 1888, 1889, 1890, by L. Maybaum.1
    Copyrighted 1888, 1889, 1890, 1891, by United States Credit System Company, Proprietors.
    Copyrighted 1888, 1889, 1890, 1891, by Maybaum and United States Credit System Company.
    Copyrighted 1889, 1890, 1891, 1892, 1893, by United States Credit System Company.
    System of this company (means of guarantee) patented December 22d, 1891, Nc. 465,485.
    CERTIFICATE OP GUARANTEE.
    On the receipt of $710, guarantee fee, and the compliance of James Talcott with all the provisions of this contract, the United States Credit System Company agrees to pay to said above-named party such a sum not exceeding $15,000, in excess of, as per special attached on the total, all sales and shipments of merchandise made between the 1st day of February, 1893, and the 31st day of January, 1894, as said above-named party may actually lose on such shipments on legally ascertained insolvent debtors whose insolvency occurred after payment of said guarantee fee, of whom the United States Credit System Company had been notified on its notice of failure blanks, with all questions thereon answered, within ten days after said above-named party had information of such insolvency, and who, in the latest existing book of R. G. Dun & Company, prior to each shipment of merchandise, were rated from the capital mark of “ J ” and upward, with either the first or second credit mark for such respective capital letter mark, or “K3J,”and for an amount not exceeding twenty-five per cent, of §uch lowest capital rating, but no account, however, shall exceefi $10,000.
    All amounts procured and procurable shall be deducted from all claims, after which twelve and one-half per cent, shall be deducted from the net amount remaining. In consideration of above deductions all claims shall remain the property of said above-named party. Only the losses of the above-named party occurring on his or their sales of merchandise usually dealt in by him or them, and only to the extent of the risk assumed by sluch party, shall be included in the calculation of losses subject to all other terms of this contract. Where any claim exceeds the amount covered by this certificate the amount procured or procurable thereon shall be deducted pro rata.

    Losses, notice of which as provided above not having been received by the United States Credit System Company, at its home office, at Newark, New Jersey, up to the date of expiration of this certificate, shall not be included in the calculation of losses thereunder. Covered losses, occurring after this certificate expires, on shipments made during its term are provable under the renewal hereof as if the goods had been shipped thereunder; provided, the United States Credit System Company has issued and received payment for such renewal on or before the expiration hereof. If this certifiate has been paid for on or before the date'of expiration of the certificate held by above-named party last prior to this one, then and in that case losses occurring during the life of-this certificate, on goods shipped during the term of the last prior one, shall be included in the calculation of losses under this certificate in the same manner as if the goods had been shipped and the loss had occurred during the life of this certificate.

      Excess losses shall be adjusted and paid by the United SLates Credit System Company within sixty days after verified final proof of loss has been filed at the home office of said company, at Newark, New Jersey, less the amounts procured and procurable at the time of payment by this company, and the twelve and one-half per cent, as above mentioned.
    This proof of loss shall specifically show the facts upon which the above-named party bases the belief that the claims are a loss, which facts must be sufficient to prove such claims a loss; a statement of the amount of all sales and shipments between and including date of beginning and expiration of this certificate; the names of the person or persons to whom the goods were sold on whom losses were made; date of shipment; amounts paid on account; amounts secured, guaranteed or indemnified; amounts of settlements accepted; the discounts the debtor or debtors would have been entitled to receive at the time of insolvency, had they then paid, which shall be deducted ; said verified proof of loss must be filed within ten days after the certificate expires, or else all claims'under this certificate shall be forever barred.
    The amount of goods shipped before a party was covered by this certificate, remaining unpaid at the time of such insolvency, shall be deducted from the twenty-five per cent, or $10,000 limits. Losses on claims under extension at time of payment of the guarantee fee above named shall not be included in the calculation of losses.
    It is understood and agreed that if the said above-named party should sell a party whose name does not appear in the latest book prior to the shipment of the goods, owing to the fact that such party had gone into business since said latest book was issued, and such a party receives a rating printed in the next subsequent book sufficient to be covered according to this certificate, then and in that case the goods shipped between said latest book, prior to the shipment of the goods and said next subsequent book, shall be covered by this certificate as if 'said rating in said next subsequent book had existed prior to the shipment of the said goods.
    There shall be no liability on the part of the company unless the said above-named party shall have uninterruptedly continued or carried on his or their said business in the usual manner for the full period of the term herein mentioned and set forth; and should he or they not so continue fifty per cent, of the guarantee fee received shall be returned in full satisfaction of all claims against this company.
    The application signed by the above-named party shall and does hereby form a part of this contract.
    In witness whereof the said United States Credit System Company has caused its corporate seal to be hereto affixed and these presents to be signed by its president and attested by its secretary, at Newark, N. J., this 11th day of August, 1893.
    ¥m. H. F. Fiedler,

      President.

    [Seal.] Feed. M. Wheeler,

      Secretary.

    [Rider attached to Policy.]
    In issuing the annexed certificate No. 2,377 — 9 to James Talcott, it is understood and agreed that this company shall not be liable in whole or in part for any loss wholly or partly guaranteed, indemnified secured or in any other manner protected under bond No. 960, issued to said James Talcott by the American Credit Indemnity Company, dated February 1st, 1893, and expiring January 31st, 1894. Under such bond the same James Talcott is first to bear an initial loss of $12,000, plus one-third to be thereto added, as in such bond provided, and the face of such bond guarantees, indemnifies or secures $12,000 in excess of such initial loss, the said initial loss being the loss to be first borne by the said James Talcott under said bond on his entire sales and shipments, with the exception of the woolen department and New Britain hosiery department, on sales not exceeding $2,400,000; and should the sales exceed that sum the same proportion is to be added for sales in excess thereof; and whereas the losses which may occur up to January 31st, 1894, in accordance with the terms and conditions of the annexed certificate No. 2,377-9, may exceed the amount covered by said bond of said American Credit Indemnity Company, it is understood and agreed that should the losses of said James Talcott on such sales and shipments, and during such period, amount to a sum so that the said American Credit Indemnity Company is obliged to pay the sum of $12,000, in accordance with the terms and conditions of said bond, then and in that case the United States Credit System Company is to pay the losses occurring in excess thereof, not exceeding, however, the amount of said $15,000 guarantee, less deductions, in accordance with the terms and conditions of this certificate.
    It is further understood and agreed that the said James Talcott shall, within ten days after ascertaining any insolvency, file duplicates with the United States Credit System Company of any losses or claims that are filed with the American Credit Indemnity Company under its bond ; and it is further agreed that a copy of the bond as is now held by said James Talcott, of the American Credit Indemnity Company, shall also be filed with the United States Credit System Company. All other terms and conditions of certificate No. 2,377-9 are to remain in force.
    [Eider attached to Policy.]
    It is further agreed and understood that advances made to manufacturers upon merchandise in the ordinary course of business of commission merchants shall be included in the sum covered under the conditions of this certificate, and where the manufacturer to whom such advances have been made has become insolvent and such merchandise has to be sold for less than the amount of such advances, the net loss resulting from such advances shall be included in the calculation of losses under this certificate.
    It is agreed and understood that the word “ ten,” in line 8 of annexed certificate No. 2,377-9, is changed to “twenty” days. It is further agreed that the rating of “L3J” is covered for $150 and the rating of “ M 3J” for $50. It is further agreed that the company waives the filing of a copy of the bond of the American Credit Indemnity Company; and it is also agreed that should losses of account occur during the last ten days prior to the expiration of said annexed certificate and the said James Talcott should not ascertain such losses in time to file the same under said certificate prior to its expiration, it is agreed and understood that such losses occurring within the last ten days prior to the expiration of said certificate said Janus Talcott shall have the right to file such losses at the home office of said company not later than February 10th, 1894. It is further agreed that the words “ New Britain Hosiery Department,” appearing in the special attached, be in the same and is hereby changed to “American Hosiery Company Department.”
    L. Maybaum,
    Dated August 15th, 1893. Actuary.

    BOND OF INDEMNITY ATTACHED TO COMPLAINT.
    Premium. The American Credit Indemnity Number
    §348. Company. 960.
    Incorporated 1891, under the Law of Louisiana.
    Central Office: St. Louis, Mo.
    The American Credit Indemnity Company grants, bargains and sells unto James Talcott, of New York city, this its bond of indemnity, guaranteeing the said James Talcott against loss to the extent of and not exceeding $12,000, resulting from insolvency of debtors over and above an annual net loss of $12,000, first to be borne by the said James Talcott on total gross sales and deliveries of goods, wares or merchandise, amounting to $2,400,000 or less, said sales and deliveries to be made to firms, corporations or individuals actively engaged in commercial or mercantile pursuits in the United States of America, between the date hereof and the 31st day of January, 1894, both days inclusive.
    This bond is issued and accepted upon the condition that the terms and conditions printed or written by the company upon the back of this bond are accepted by the said James Talcott as part of this contract as fully as if they were recited at length over the signatures hereto affixed.

      In witness whereof the American Credit Indemnity Company has caused its corporate seal to be hereto affixed and this bond to be. signed by its president and secretary, in the city of New Orleans, Louisiana, this 1st day of February, 1893.
    S. M. Phelan,

      President.

    [Seal.] Ryland D. Rash,

      Secretary.

      Conditions under which this Pond of Indemnity is Sold.

    3. No credit is covered by this bond unless the debtor or debtors shall have, in the latest published book of the R. G. Dun & Company Mercantile Agency, at the date of each shipment of goods, included in the indebtedness to be proven one of the ratings of the said mercantile agency, both as to capital and credit as given below. The amount to be proven under this bond against any one insolvent debtor is limited to twenty-five per cent, of the lowest amount of the capital rating given by said ageney where the highest credit rating follows, and to twenty-five per cent, of such lowest capital rating where the next highest credit rating follows, and no account against any one insolvent debtor shall be proven for moi;e than $10,000. The books of the said named mercantile agency shall respectively cover shipments made from the first day of the month named and borne by the said book to the first day of the month named and borne by the next subsequent book, but where a report reduces or withdraws a rating in a book, shipments made after such report was issued shall be governed by the said changed rating.
    4. Proof of loss must be made by the indemnified to the American Credit Indemnity Company, at its office in St. Louis, Missouri, upon the blanks furnished and in the manner prescribed by said company, within twenty days after knowledge of the insolvency of any debt shall have been received by the indemnified or his or their agent; otherwise such claim shall be barred.

      5. The basis of the net loss fixed in this bond is one-half of one per cent, on total annual gross sales by the indemnified of $2,400,000, and should such total annual gross sales exeeed said, amount the net loss to be borne by the indemnified, under this bond, shall increase in like ratio.
    6. Liability under this bond is limited to actual sales of goods, wares or merchandise owned, consigned to, sold and delivered by the indemnified.
    8. ISTo claim for loss can be proven after the expiration of this bond, provided, however, that in case this bond is renewed at or before its expiration the loss resulting after said date of expiration, upon shipments made during the term of this bond, may be proven under such renewal.
    9. In all cases where the indemnified under this contract shall hold other security, guarantee indemnity or preference, or shall have instituted attachment or replevin proceedings against any insolvent debtor covered under this bond, the amounts realized therefrom shall be deducted before the loss under this bond shall be adjusted.
    12 a. To simplify adjustment and to avoid disputes, it is agreed that such sum of “gross loss” shall be the limit to be borne by the indemnified, as less twenty-five per cent, will equal the agreed amount of annual net loss; all claims making up such said sum of gross loss to remain the property of the indemnified, the company relinquishing its claims except as hereinbefore provided.
    12 b. When any claim shall be allowed beyond the gross amount agreed to be borne by the indemnified, this company shall adjust and settle same, first deducting twenty-five per cent, thereof, in consideration of which such claims shall remain the property of the indemnified. The-limit of excess loss claims to be proven hereunder to be $12,000.
    S. M. Phelan,

      President.

    Ryland D. Rash, [Seal.]

      Secretary.

      12 c. Final proof of loss shall be forwarded to the central office of this company, upon the blanks furnished, and in the manner prescribed by the company, within twenty days after the expiration of this bond, and the amount due by this company, under such final proof of loss, shall be payable within sixty days after adjustment.
    13. The premium upon this bond is due and payable upon its delivery, by cheek or draft to the order of the American Credit Indemnity Company, and if such payment shall not be made within five days following its delivery, this bond shall be void at the option of the company, and no losses are provable under this bond which occur prior to the payment of the premium.
    It is agreed and understood that this bond is to cover the entire sales of James Talcott and the New Britain Knitting Company, excepting woolen goods department, now under the management of Look & Braman.
    S. M. Phelan,

      President.

    [Seal.] Ryland D. Rash,

      Secretary.

    In consideration of the lapsing of certificate No. D 399, series H, of the United States Credit System Company, Newark, New Jersey, it is agreed that all losses provable under a renewal of same may be proven hereunder, subject to the terms and conditions of this bond.
    S. M. Phelan,

      President.

      ■ [Seal.] Ryland D. Rash,

      Secretary.

    It is further agreed and understood that advances made to manufacturers upon merchandise in the ordinary course of business of commission merchants shall be included in the sum covered under the conditions of this bond, and where the manufacturer to whom such advances have been made has become insolvent, and such merchandise has to be sold for less than the amount of such advances, the net loss resulting from such advances shall be included in the calculation of losses under this bond.
    S. M. Phelan,

      President.

    [Seal.] Ryland D. Rash,

      Secretary.

      Mr. Edward M. Colie, for the appellant.

      Mr. Howard W. Hayes, for the respondent.
   The opinion of the court was delivered by

Dixon, J.

This controversy turns on the meaning of the certificate of guarantee issued by the United States Credit System Company and the bond of indemnity issued by the American Credit Indemnity Company, which are above set forth. Only the conclusions of the court on the points involved will be stated, leaving the account to be settled, in the court below, as suggested by counsel on the argument.

The certificate of guarantee is supplementary to the bond of indemnity; but only sales of merchandise and advances to manufacturers made during the year beginning February 1st, 1893, are within the scope of the certificate, while such sales and advances made during the preceding year are also, by force of the renewal clause, included within the scope of the bond. For this reason it is equitable that the appellant’s “ initial loss,” $16,000, and the indemnity fund under the bond, $12,000, should be applied first to the losses on transactions taking place before February 1st, 1893. As those losses do not amount to the aggregate of those sums, $28,000, the balance of that aggregate should be applied to the losses on the transactions of the later year; the residue of these losses is' the sum to which the respondent’s certificate should be applied.

In considering claims for merchandise sold, we understand that no account of this nature exceeds $10,000, and therefore the $10,000 clause of the certificate is here irrelevant.

To ascertain t'he loss occurring on the insolvency of any person owing for goods sold, there should be deducted from the balance owed at the date of insolvency—

First. Charges in the account for goods returned or replevied after insolvency, before April 10th, 1894, the date for adjustment according to the terms of the certificate.

Second: Discounts allowable on the balance if it had been paid at the date of insolvency. '

■Third. Amounts procured on account before April 10th, 1891.

Fourth. Amounts procurable on April 10th, 1891, by which we understand amounts likely to be received oir the account from any source other than the mere personal responsibility of the insolvent.

Fifth. Twelve and a half per cent, of the net balance remaining, which we understand to be the stipulated value of the personal responsibility of the insolvent, the last three deductions being the consideration for which the claim is to remain the property of the creditor.

The loss on the account for advances made to Atwood is within the scope of the certificate, and is subject to the conditions of the certificate, except so far as the conditions are modified by the terms of the rider relating to them.

One of those conditions is that no account shall exceed $10,000, and, if it does, the amount procured or procurable thereon shall be deducted pro rata. But we think this condition is modified by the terms of the rider to this extent, that the account which is not to exceed $10,000 is the balance remaining after crediting upon the advances the proceeds of sale of the merchandise in the hands of the creditor at the time of insolvency, so far as, the merchandise had been sold at the date of adjustment, and the market value of the merchandise then unsold. The balance-thus found, to the amount of $10,000, is to be included’ in the calculation of losses under the certificate. This balance, not exceeding $10,000, will be subject to further reduction by the amounts procured or procurable from any source other than the merchandise on which the advances were made and Atwood’s personal responsibility, and also by the twelve and a half per cent, for which the claim is to remain the property of the creditor.

So much of the advances made to Atwood before February 1st, 1893, as had not been paid at the time of his insolvency should be paid out of the goods then in the hands of the appellant, before the proceeds of those goods are applied to the payment of the advances made after February 1st, 1893. The effect of this will be, we understand, to show that there was no loss on the advances made in the earlier year.

The decree below should be reversed and the cause remitted to the court of chancery, in order that the appellant’s claim against the receiver may be adjusted according to the foregoing views.

For reversal — The Chief-Justice, Depue, Van Syokel, Dixon, Garrison, Gummere, Ludlow, Collins, Lippincott, Bogert, Hendrickson, Adams, Nixon — 13.

For affirmance — None.


author: Gummere, J. Magie, Chief-Justice

text:
    Betsy E. Felt, complainant and appellant, v. Joseph F. Felt, defendant and respondent.
    [Filed December 22d, 1899 ]
    Interstate comity requires that a decree of divorce pronounced by a court of the state in which the complainant is domiciled, and which has jurisdiction of the subject-matter of the suit, shall, in the absence of fraud, be given full force and effect within the jurisdiction of a sister state, notwithstanding tHat the defendant does not reside within the jurisdiction of the court which pronounced the decree and has not been served with process therein; provided, that a substituted service has been made in accordance with the provisions of the statute of that state and that actual notice of the pendency of the'suit has been given to the defendant and a reasonable opportunity afforded to put in a defence thereto; and provided further, that the ground upon which the decree rests is one which the public policy of the state in which it is sought to be enforced recognizes as a sufficient cause for divorce.
    On appeal from a decree advised by Vice-Chancellor Pitney, whose opinion is reported in 12 Dick. Ch. Rep. 101.

      Mr. Frank L. Holt, for the appellant.

      Mr. Washington B. Williams, for the respondent.
   The opinion of the court was delivered by

Gummere, J.

The appellant, by her bill in this case, seeks a decree of divorce from her husband for adultery and also for desertion. The respondent has pleaded, in bar of the relief sought, a decree of absolute divorce obtained by him against the appellant in a district court of the Territory of Utah. A full recital of the averments of the plea is not necessary. It is sufficient for present purposes to say that the truth of those averments is conceded by the appellant; that from them it appears that the court which rendered the decree pleaded had jurisdiction of the subject-matter of the suit and of the respondent here, who was the complainant therein, and who, at the time of the institution of the suit, was a bona fide' resident of the Territory of Utah that the domicile of his wife was in this state and that she was neither served with process within the Territory of Utah nor did she personally submit herself to the jurisdiction of the court, but that jurisdiction was obtained by publication of the process and complaint, made in accordance with the statutes of Utah; that in addition, personal service thereof was made upon her, at her residence in New Jersey, a sufficiently long time before the period within which to make answer had expired, to afford her an opportunity to defend the suit if she had desired to do so, and that the decree was granted upon two grounds, viz., cruelty and desertion.

What force and effect will be attributed to a decree of divorce rendered in a court of a sister state, where the jurisdiction of the court rests solely upon the domicile of the complainant, and where the defendant, being a non-resident, is brought into court by publication and the service of notice outside the- jurisdiction, is a question of first impression in this court. It will not be denied that the preservation of good morals and a proper regard for social relations make it desirable that such a decree should be considered valid not only in the state where it is pronounced but in every other jurisdiction, provided the grounds upon which it is based are recognized in such jurisdiction as justifying the decree. By it the matrimonial relation of the husband and wife is terminated in the state in which, it is rendered. Within the boundaries of that state a marriage afterward contracted by either of the parties with a third person is entirely valid. So, too, sexual relations between the former husband and wife within that jurisdiction subsequent to the entry of the decree are illicit unless sanctioned by a new marriage. But if the decree is without extra-territorial force the entire status of both parties is reversed as soon as they pass beyond the limits of that state. A subsequent marriage to a third person within, that state then becomes void and the relations of the parties to it become adulterous, while sexual relations between the parties to the decree, which are meretricious if indulged in within that state, become matrimonial again when indulged in without its borders. A condition of the law which makes the intercourse-of a man and woman either legitimate or adulterous as they happen to be within the limits of one state or another is not to be tolerated any further than is plainly required by public policy.

That the public policy of New Jersey does not require that recognition should be refused to a decree of divorce, rendered by a court of a sister state, because the defendant had her domicile in another state and was not within the jurisdiction of that court, seems to me plain. State policy, when determined by the legislative, controls the judicial branch of the government; and the legislature of New Jersey, by vesting in our court of chancery sole jurisdiction over the subject of divorce, and then authorizing it to render decrees divorcing, a mnmlo, ‘resident complainants from non-resident defendants after obtaining jurisdiction over the latter by publication, and notice served out of the state upon, or mailed to the post-office address of, the latter, has, as it seems to me, declared what our policy in this regard shall be. That it was intended by the legislature that decrees of divorce so rendered should be valid in every jurisdiction, so far as it had the power to make them so, goes without saying; and it cannot be conceived that it was intended that we should refuse to accord to the decrees rendered in the courts of our sister states against non-resident defendants who have not submitted themselves to the jurisdiction of such courts, the efficacy we claim for our own when liable to the same objection.

As has been heretofore stated, the question before us has never been determined in this court. It, however, received consideration in Doughty v. Doughty, 1 Stew. Eq. 581, although the case was decided upon another ground. In that case, Chief-Justice Beasley, delivering the opinion of the court, says: “A judgment of divorce, resting even on such a contracted foundation as the domicile of one of the parties alone, bears with it, into other jurisdictions, a title to respect, and, in some cases, a claim to voluntary adoption. In such instances, I regard the question whether the judgment shall be extra-territorially enforced to be one resting entirely on the consideration that, in a -matter of unusual interest of this nature, an obligation rests upon every government to carry into effect as far as is reasonably practicable, and as may be consistent with its own policy, all foreign judgments. But an appeal of this kind to interstate comity should, I think, never prevail when the judgment sought to be accredited has been rendered in violation of that fundamental axiom of justice that the parties, before their rights are adjudged,shall have an opportunity of being heard. A judgment of divorce proceeding from a jurisdiction founded on domicile would not contravene essential rules of natural justice if actual notice to appear had been served on the defendant residing abroad. It is true that a notice so served, on á litigant out of the jurisdiction in which a suit is pending, may add nothing to the judicial right to take cognizance over the cause, but, nevertheless, it may impart a quality to the resulting judgment that will serve as a credential to it in a foreign jurisdiction.”

There is much contrariety of opinion upon the question, in the courts of the various states, but the weight of authority seems to support the view expressed in Doughty v. Doughty, to this extent at least, that interstate comity requires that a decree of divorce pronounced by a court of the state in which the complainant is domiciled, and which has jurisdiction of the subject-matter of the suit, shall, in the absence of, fraud, be given full force and effect within the jurisdiction of a sister state, notwithstanding that the defendant does not reside within the jurisdiction of the court which pronounced the decree, and has not been served with process therein ; provided, that a substituted service has been made in accordance with the provisions of the statute of that state, and that actual notice of the pendency of the suit has been given to the defendant and. a reasonable opportunity afforded to put in a defence thereto ; and provided further, that the ground upon which the decree rests is one which the public policy of the state in which it is sought to be enforced recognizes as a sufficient cause for divorce.

That view commends itself to us, and we think that, subject to the limitations mentioned, the courts of New Jersey should, as a matter of interstate comity, recognize as valid a decree of divorce rendered by the court of a sister state against a resident of this state who has not been served with process.

In the case before us the court pronouncing the decree which has been pleaded in bar of the relief sought by the complainant was a court of the domicile of the present defendant. It had jurisdiction of the subject-matter of the suit. There was a substituted service of process upon the defendant therein (the present complainant) by publication, in accordance with the provisions of the Utah statute. Actual notice of the pendency of the suit was given to her in time to have enabled her to make defence thereto if she had desired to do so. There is not even a suggestion that the decree is tainted by fraud, and one of the grounds upon which it rests — namely, desertion — is recognized by the laws of this state as justifying the dissolution of the marriage relation.

The decree appealed from should be affirmed.

Magie, Chief-Justice

(dissenting).

I find myself unable to concur in the affirmance of the decree in this cause, and deem it my duty to briefly state the reasons which impel me to dissent from the decision of the learned vice-chancellor who advised the decree and the views of so large a majority of my associates in this court who approved his decision.

If the adjudication of the court of the Territory of Utah, to which effect is given by the decree, was one affecting the personal rights and obligations of Mrs. Felt, against whom it was made, it is indisputable that it was not an adjudication which we are compelled to recognize by the imperative provision of the constitution of the United States, because she was neither served with process within the jurisdiction of that court nor did she appear in the proceedings. Pennoyer v. Neff 95 U. S. 714.

But the contention is twofold, viz. — -first, that the adjudication in question was one affecting, not personal rights or liabilities but a status or res, the marriage relation between the parties, and that in such a case jurisdiction to adjudicate is acquired by substituted or constructive service by publication or the like, pursuant to the law of the forum, and that an adjudication in respect to such status after jurisdiction has been thus acquired will be one which the constitution of the United States requires other states to recognize and accept; or second, if that is not so, that in such a case, when the substituted - or constructive 'notice provided for by the law of the forum is supplemented by actual notice to the party against whom relief is sought, in time to give opportunity to appear and contest, an adjudication made thereon, although the notice was given in another state and the party has not appeared, must be recognized in this state on grounds of interstate comity.

I am unable to discover from the opinion below whether the learned vice-chancellor rested his conclusion upon the first argument or the second, but I do not deem either of them sound or supportable.

The theory that an action for divorce is in all cases a mere action in rem is in my judgment a misconception. When both parties are domiciled in the jurisdiction in which the action is brought it resembles an action in rem, because the status or condition which it attacks is wholly within that jurisdiction, but where the parties are domiciled in different states the status is not exclusively within the jurisdiction of the courts of one domicile.

Marriage undoubtedly creates a status by means of a contract entered into between husband and wife under the sanction of the state. Unlike other contracts, this may not be rescinded or abrogated by the consent of the parties, but only in a mode or by judicial proceedings, also sanctioned by the state. There is, therefore, an interest in the preservation or the rescission of the marital contract and the status which was created by it, not only in. the parties who contracted but in the state in which they are domiciled. If the parties have acquired different domiciles an interest of each state in the preservation or destruction of the marital status exists.

While it may be conceded that a husband, acquiring in good faith as in this ease a different domicile from that of his wife, may appeal to the courts of his domicile and obtain such relief as its laws afford, yet it does not follow that the adjudication giving such relief will properly operate upon the marital contract and status in respect- to either the state of the wife’s domicile or the wife herself. If a divorce proceeding bears in any case a resemblance to a proceeding in rem the analogy fails when the husband and wife have different domiciles, because the rem is not wholly within the jurisdiction in which the husband seeks relief, but exists, also, in the place of the wife’s domicile, in which she has a status as a married woman under the protection of the state. As to that the court of the husband’s domicile acquires no jurisdiction, and its adjudication cannot claim any extra-territorial effect within the constitutional provision.

In the view thus expressed, I have the support of the decisions of courts of the highest authority. Beginning with the masterly discussion of the subject by Judge Folger, in People v. Baker, 76 N. Y. 78, the court of appeals of New York in many successive cases have maintained the doctrine I contend for. O’Dea v. O’Dea, 101 N. Y. 23; Jones v. Jones, 108 N. Y. 415; DeMeli v. DeMeli, 120 N. Y. 485; Williams v. Williams, 130 N. Y. 193; Matter of Kemball, 155 N. Y. 62. Like views are expressed by the courts of Massachusetts, North Carolina and Pennsylvania. Hanover v. Turner, 14 Mass. 227; Lyon v. Lyon, 2 Gray 367; Blackinton v. Blackinton, 141 Mass. 432; Irby v. Wilson, 1 Dev. & B. Eq. 568; Harris v. Harris, 115 N. C. 587; Arrington v. Arrington, 102 N. C. 491; Colvin v. Reed, 55 Pa. St. 375; Reel v. Elder, 62 Pa. St. 308. The opposite view is maintained by other courts and supported by authors of high repute. But for the reason above given, I think the jurisdiction of the oourts of a foreign state to pronounce a definite judgment upon the status of a resident of this state, who has not been served with process or appeared to the action, cannot be admitted without an abandonment of fundamental principles. Nor can I perceive the least ground for a distinction between adjudications abrogating the marriage contract and dissolving the marital relation and adjudications respecting the incidental rights and duties which arise out of that relation, such as alimony, dower, curtesy, custody of children. Yet we have declared that our act will not justify a decree for alimony against a defendant not domiciled here and who had not been served with process here, nor entered appearance in the suit. Lynde v. Lynde, 9 Dick. Ch. Rep. 473; S. C., 10 Dick. Ch. Rep. 591; Hervey v. Hervey, 11 Dick. Ch. Rep. 166; S. C., 11 Dick. Ch. Rep. 424. In some of the states which recognize an extra-territorial effect in divorce decrees obtained in proceedings where the defendant is domiciled elsewhere and only brought in by constructive service of process, the like effect is given to the decrees in respect to these incidents of the marital status, in others such effect is, I think inconsistently, denied.

The contention that the Utah decree of divorce in this case ought to be recognized here on grounds of interstate comity, because it appears that notice of the pendency of the proceeding there was actually given to the wife in this state in time to have enabled her to appear and contest against the adjudication, remains to be considered.

In Doughty v. Doughty, 1 Stew. Eq. 581, Chief-Justice Beasley, after pointing out that jurisdiction in divorce suits arising out of the status and domicile of one of the parties would not impart to the judgment therein such efficiency as would result if the proceeding was strictly in rem, and that an appeal to interstate comity ought not to prevail when the judgment sought to be thus accredited has been rendered in violation of the fundamental axiom that the parties, before their rights are adjudged, should have an opportunity to be heard, suggested that an actual notice to the party residing abroad while adding nothing to the judicial right to take cognizance of the cause, might, nevertheless, impart a quality to the judgment that would serve as a credential to it in a foreign jurisdiction.

The view thus suggested was entirely unnecessary for the decision of that case. The tentative way in which it was expressed justly leads to the conclusion that it was not intended to exhibit the deliberate and matured opinion of that distinguished jurist. The question is res integra here and the soundness of the view expressed may bé considered.

The first observation I make upon this view is that neither in the suggestion of the chief-justice nor in the opinions of the courts which have adopted it is the manner and sufficiency of such a supplemental notice determined. How is the existence of sufficient notice to be determined ? Shall it be by legislation of the domicile of jurisdiction or the foreign domicile in which the defendant resides ? Is auy legislation essential to give effect to notice actually given ? If not will oral notice or notice by letter of the pendency of the suit suffice? Obviously, the fact on which comity is urged to recognize the validity of a foreign judgment respecting one of the relations of life of the utmost importance to human society is left in the vaguest and most' uncertain condition. -

It may further .be observed that the question is whether jurisdiction to adjudicate, not in respect to the party domiciled within the state in which the proceeding is pending but in respect to the status of the party domiciled in the foreign state and under the protection of its laws, exists. In this aspect, to hold that jurisdiction was acquired by mere notice served without the jurisdiction would violate all the fundamental principles on which jurisdiction to adjudicate on individual rights is based, viz., that, as Chief-Justice Beasley declared, parties before their rights are adjudged shall have an opportunity to be heard, and this must mean an opportunity afforded by legal process or appearance and not by unofficial, unaccredited and uncertain notification.

If I could find any force to be attributed to this Utah decree by virtue of the notice given to Mrs. Felt in New Jersey, I should still be unwilling to recognize it, because, in my judgment, comity does not require us to do so. The public policy of this state on the subject and causes of divorce is clearly expressed in our statutes. Contracts lawful and enforceable in another state will not be enforced here against our citizens if they are in contravention of the plain public policy of the state. Flagg v. Baldwin, 11 Stew. Eq. 219. In like manner, comity will not require us to recognize a foreign decree dissolving the marital relation of a citizen for a cause contrary to the public policy here adopted. This decree is based, among others, on the ground of cruel treatment, causing mental distress — a cause which it is needless to say is not within those which our public policy recognizes.

But, apart from this reason, I am of opinion that comity will not require us to recognize this Utah decree because of the actual service of notice on Mrs. Felt here. Poverty, sickness, distance or other circumstances might prevent her availing herself of an opportunity to contest the proceedings. When there is service in the place of the forum and the law prescribes the effect thereof, such circumstances can have no place in judicial consideration and the effect presented must be attributed. But when the notice is not within the forum and has no prescribed effect, it is as it were nothing and does not, in a legal sense, afford the party an opportunity to be heard. Such is the conclusion reached in many of the cases heretofore cited, and which, therefore, need not be further mentioned.

The result is that I feel constrained to vote to reverse the decree below.

I have not felt deterred from this course by either of the two considerations that have affected my brethren.

It must be admitted that the view I take, reduced to its practical results, produces a condition of things which is anomalous and unfortunate. Upon the concession I have made, respondent is, in Utah, free from the bonds of matrimony while appellant is his wife here. It may be that respondent is capable of forming another marital relation elsewhere than in New Jersey, which we may be compelled to recognize, and it may also be that cohabitation with such substituted wife may be cause for divorce on the part of the first wife. These unfortunate results must be charged to the diversities and deficiencies of our laws on the subject of marriage and divorce. They afford a powerful argument in favor of uniformity of such laws either by committing the matter to the control of the congress by an amendment of the constitution of the United States, or by a voluntary assimilation of the laws of our states and territories. But the results, however deplorable, ought not to lead us to the abandonment of fundamental principles of universal application and importance.

Nor am I affected by the fact that our legislative policy permits the entry of decrees of divorce against non-resident defendants upon constructive or substituted notice. Upon my construction of such legislation a decree so made is limited in its effect; it adjudicates upon the status of the party within the jurisdiction and lias no extra-territorial effect as to the non-resident party who has not appeared or been served. These effects I attribute to like decrees of other jurisdictions upon similar legislation. What comity requires me to concede to those decrees is all that I demand should be conceded to our decrees of the same sort.

For affirmance — Yan Sycicel, Dixon, Garrison, Lippincott, Gummere, Ludlow, Collins, Bogert, 'Hendrickson, Adams, Nixon, Yredenburgh — 12.

For reversal — The Chief-Justice — 1.


author: Collins, J.

text:
    The Bayonne Building Association No. 2, complainant, v. Emily A. Williams et al., defendants and respondents.
    [Submitted March Term, 1899.
    Decided June 19th, 1899.
    Filed June 19th, 1899.]
    1. The inchoate lien given to journeymen, laborers and materialmen by the fifth section of the supplement of March 14th, 1895 (Gen. Stal. p. SCO'S), to the Mechanics’ Lien law, can be perfected in no other way than by demand on the contractor, and, on refusal of payment by him, service on the owner, before his liability to the contractor matures, of the notice prescribed by the third section of the original act as revised by the second section of said supplement.
    2. Said supplement does not require or authorize payment of such perfected liens pro rata. Payment, as before its enactment, must be m'ade in order of priority of service of notice.
    On appeal of Alfred W. Booth et al. from decree advised by Yice-Chancellor Pitney, whose opinion is reported in 12 JDich. Ch. Rep. 503.

      Mr. James Benny, for the appellant.

      Mr.Allan Benny, for Cooney & Gilbertson.

      Messrs. Robertson & Demarest, for the other respondents.
   The opinion of the court was delivered by

Collins, J.

The Mechanics’ Lien law, in its third section, as revised by section 2 of the supplement of March 14th, 1895 (Gen. Stat. p. 2073), provides as follows:

“ Whenever any master workman or contractor shall, upon demand, refuse to pay any person who may have furnished materials used in the erection of any such house or other building, or any journeyman or laborer employed by him in the erecting or constructing any building, the money or wages due to-him, it shall be the duty of such journeyman or laborer or materialman to givei 'notice in writing to the owner or owners of such building of such refusal, and of the amount due to him or them and so demanded, and the owner or owners' of such building shall thereupon' be authorized to retain the amount so due and ¿claimed by any such journeyman, laborer or materialman out of the amount owing by him or them to such master -workman or contractor, or that, may thereafter become due from him or them to such master workman or contractor for labor or materials used in the erection of such building, giving him written notice of such notice and demand ; and if the same be not paid or settled by said master workman or contractor, such owner or owners on being satisfied of the correctness of said demand shall pay the same, and the receipt of such journeyman, laborer or materialman for the same shall entitle such owner or owners to an allowance therefor in the settlement of accountsjbetween him and such master workman or contractor as so much paid on account.”

This section remains substantially unaltered from its original enactment in 1853 as the courts have construed it, the only change in its phraseology being to make specific what was-judicially inferred.

In 1862 Chancellor Green was called on by bill of inter-pleader.'to consider three classes of claims pressed upon the owner of a building, erected by contract, who owed the contractor a balance insufficient to pay them all. These classes were (1) claims which were for labor or materials furnished for the building and for which the creditors had made demand and given notice under the third section of the Mechanics’ Lien law; (2) claims of the same character for which the contractor had given orders upon the owner, and (3) claims for other debts due-from the contractor for which he had given like orders.

It was adjudged that each creditor of these several classes was entitled to be paid in the order in which his notice or order was presented to the owner. Superintendent, &c., v. Heath, 2 McCart. 22. This decision has been uniformly followed in the supreme court as well as in chancery, and has been inferentially if not expressly upheld in this court. Craig v. Smith, 8 Vr. 549; Burnett v. Jersey City, 4 Stew. Eq. 341; Mayer v. Mutchler, 21 Vr. 162; Hall v. Baldwin, 18 Stew. Eq. 858.

In the light of these decisions the legislature, in , the same supplement by which it revised and re-enacted the third section of the statute, introduced into it a new feature as follows:

“Sec. 5. That if the owner or owners of any building or other property which, by the act to which this is a supplement or the various supplements and amendments thereto, is made the subject of liens for or toward the construction, altering, repair or improvement of which labor or services have been performed or materials furnished by contract duly filed, shall, for'the purpose of avoiding the provisions of the act to which this is a supplement, or the various supplements and amendments thereto, or in advance of the terms of such contract, pay any money or other valuable thing on such contract, and the amount still due to the contractor, after such payment has been made, shall be insufficient to satisfy the notices served in conformity with the provisions of the act to which this is a supplement, or the various .supplements or amendments thereto, such owner or owners shall be liable in the same manner as if no such payment had been made.”

In Slingerland v. Binns,. 11 Dick. Ch.Rep. 413, this court construed the new section to give to workmen and materialmen as against the contractor and his assigns an inchoate lien, ah initio, upon the liability of the owner to the contractor of a building for which they furnish labor or material; but distinctly declared that such lien becomes perfect only on service, before that liability matures, of the statutory notice based on demand and refusal of payment, and expires on such maturity if no notice be given. To substitute “ simpler machinery for the perfecting of the inchoate lien would be not to construe, but to legislate. Consequently we cannot approve of the conclusion reached by the learned vice-chancellor in the opinion and decree now before us, that such an inchoate lien may be perfected by an order on the owner. As the respondent Conklin served no notice before the final payment fell due under the contract, his lien expired, and he must stand simply as the holder of an order and subject to all claims under duly-served notices and under orders presented before his own.

The vice-chancellor’s tentative decision that under the supplement of 1895 claimants within its provisions must share pro rata a fund insufficient for payment in full, has no operation when the Conklin claim is rejected, but ought not to stand as a precedent. In that respect the law has not been changed. All that the supplement effects is that the contractor shall not by assignment, nor shall the owner by premature payment, defeat a duly-served notice. The express provision is that such owner or owners shall be liable in the same manner as if no such payment had been made.” As before the supplement an owner was liable in the order of service of notice, such is still the order of liability. Courts cannot, by construction, “do way with” the “ hardships and inequities ” of a statute.

We agree with the vice-chancellor in his conclusions of fact, and the result therefore is that, after payment to the complainant of its costs and counsel fee as allowed, the various claimants should be paid in the following order:

1. Cooney & Gilbertson, $306 with interest and costs.

2. Frank Beardsley, $38.82 with interest and costs.

3. William C. Oliver, $360 with.interest and costs.

4. Alfred W. Booth & Brother, the residue of the fund, such residue being insufficient to satisfy their claim.

Let the decree be reversed and modified in conformity with this opinion.

For reversal — The Chief-Justice, Van Syokel, Dixon, Lippincott, Gummere, Ludlow, Collins, Bogert, Hendrickson, Adams, Nixon, Vredenburgh — 12.

For affirmance — None.