text:
    Ann Elizabeth Wuhderlich, complainant, v. Doba Bleyle et al., defendants.
    [Decided July 9th, 1924.]
    1. Where testator devised property to two of his daughters for their lives, and “from and after the death of my daughters” to their children then living, the devise over, after death of the life tenants or either of them, created a contingent remainder.
    2. Where testator devised property to his four daughters for life, with a provision that, if any of them should die, to their children then living, and in another paragraph provided that if any of them died intestate and without issue, her portion should be equally divided between all testator’s grandchildren then living, the expression “die intestate” was meaningless, and gave no power of appointment, since each daughter had only a life estate, and no power to appoint, and “without issue” meant without children.
    3. Where a will was drawn hy one unlearned in law, in determining whether certain legal phrases created a joint tenancy, the-whole scheme of will should be examined into to determine whether they were used in a legal sense.
    4. Where testator, intending to treat all his daughters and grandchildren alike, devised property to two of his daughters in separate-paragraphs of his will, and in a third paragraph devised property to two other daughters “to have and to hold the same jointly,” and provisions of this paragraph were practically the same as those of devises to his other daughters, they were tenants in common; the word “jointly” having been -used in the popular sense, meaning, participated in or -used by two or more, held or shared in common.
    3. Where a devise was to tiwo of testator’s daughters asi tenants in common, and “from and after the death of my daughters” to their children then living, and upon the death of one leaving children the remainder became vested and the children took under the will of testator, freed from any right of other grandchildren, under a clause giving- them rights if a daughter should die intestate and without issue, and deeds by children of the deceased daughter to their mother’s share, would pass a fee.
    0. Where devise was to two of testator’s daughters as tenants in-common. and “from and after the death of my daughters” to their children then living, with a further provision that on death of a daughter intestate and without issue, her share should go to testator’s grandchildren then living, during life of a daughter, the remamder in her children was contingent, its vesting being dependent on her death, when, if she left children, it would vest in them, but, if not, in all testator’s living grandchildren, and deeds by her children to her would pass no estate during her lifetime.
    On bill, &o.

      Mr. Randolph Perkins, for the complainant.

      Messrs. Whiling & Moore, for the defendants.
   Griffin, V. C.

The bill in this cause is filed to quiet the title to lands in Hudson county. The sole question presented is, What is the true construction of the second, paragraph of the fourth item of the will of John C. Sandmann?

The testator died in 1882, leaving the will in question, dated April 21st, 1882. By the second item he gave to his wife a life estate in all of his property, to be cut down in case she remarried. The widow died in 1906. In the fourth item the testator, by numbered paragraphs, made disposition of all his property after the death of his wife. Hnder the ■second paragraph provision was made for his two daughters, Sophia H. Alberts and Ann Eliza Wunderlich. The second paragraph is as follows:

“Secomd. I give, bequeath and devise unto my two daughters namely 'Sophia Helena Sandmann, -wife of Gustav Alberts and Anna Eliza Sandmann, wife of Emile Wunderlich both of the City, County and 'State of New York, my two houses and lots known as numbers twenty ■seven and twenty nine, on the west side of Cambridge Avenue, between Franklin and Hutton Streets, and also by houses and lots known as numbers two hundred and seventy and two hundred and seventy two Central Avenue with the rear houses thereon situate on the east side of Central Avenue between Franklin and Hutton Streets all in Jersey City, Hudson County, State of New Jersey to have and to hold the same jointly and receive the rents, interest, issues and profits thereof, and enjoy the same as their own and separate property during the term 'of their natural lives, together with the privilege of the right of way for water and sewer pipes leading from Central Avenue property through the lot known as number twenty seven Cambridge Avenue which privilege shall never be sold or cut off except by mutual consent between all parties interested, charging my said daughters Sophia Helena and Anna Eliza to keep the estate so devised to them free and clear of and from all encumbrances during the term aforesaid, and from and after the death of my said daughters Sophia Helena and Anna Eliza, I give bequeath and devise the estate so given to them to their children then living share and share alike forever. But in case my said daughters Sophia Helena and Anna Eliza cannot agree in the division of the income of said estate so devised to them, then said estate to be sold by my Executors hereinafter named and the proceeds of such sale 'or sales to ;be invested share and share alike, in good security for the benefit of my said two daughters, Sophia Helena and Anna Eliza during the term of her natural lives, and after the death of my said daughter or daughters the sum so invested to belong to the child or children of such daughter forever.”
At the foot of the third paragraph is the following:

“Provided however that should any of my said four daughters die intestate and without an issue, then it is my Will and I do order that the bequeaths so made by me to such intestate or issueless daughter or daughters, as the case may be, or the remainder of such bequeaths shall be equally divided between all of my grandchildren then living share and share alike.”

Mrs. Wunderlich is living and has children. Her sister, Mrs. Alberts, died in the year 1889, leaving children. The complainant contends that, under this paragraph, the children of Mrs. Wunderlich and Mrs. Alberts took a vested remainder in fee as tenants in common. The defendants contend that the remainder, as to these children, was contingent, and that Mrs. Wunderlich and Mrs. Alberts took as joint tenants, so that, upon the death of Mrs. Alberts, Mrs. Wunderlich took as survivor for life, and, upon her death, the living children of Mrs. Wunderlich and Mrs. Alberts would take, share and share alike.

The devise over, after the decease of Mrs. Wunderlich and Mrs. Alberts, or either, clearly creates a contingent remainder. The testator not only said, “from and after the death of my daughters, I give, devise and bequeath,” but the devise is to their children then living (i. e., at the time of the decease of their parents), which language is plain and unambiguous. The testator had four daughters; the other two received similar.bequests but in separate paragraphs, and the. same identical language as to the devolution of the estate after the death of each of these daughters is used in the two separate paragraphs above referred to> being Nos. 1 and 4.

In order to provide for the contingency which might arise if any of his daughters died without leaving children her surviving, he inserted the above proviso; that upon the death of any of his four daughters intestate and without issue; the share which such daughter had for life should be equally divided among all of his grandchildren, share and share alike. Taken from the plain purpose expressed by the testator in the will on this question, my view is that “die intestate” is meaningless, because all the daughter had was a life estate, and there was no power given under the will to' appoint. And the words “without issue,” in the light of this will, means children. These ambiguties plainly arose from the ignorance of the scrivener who drew the will, the effect off which will be dealt with hereafter.

The conclusion I have reached on this point is that this is a contingent remainder. Tantum v. Campbell (Chancellor Walker), 83 N. J. Eq. 361.

The next question to be considered is, Does paragraph 2 create a joint tenancy in Mrs. Alberts and Mrs. Wunderlich ?

As above stated, this will was drawn by one unlearned in the law, and in construing this point regard must be had to the knowledge of the law possessed by the scrivener. It is apparent from the whole will that he had very slight knowledge of the law. He apparently knew some legal words and phrases, possibly gleaned from forms, but it is quite apparent that he was unfamiliar with the legal import of certain words used. Therefore, in construing these legal words and phrases, the whole scheme of the will should be examined into to determine whether they were used in the legal sense. Hewitt v. Green, 77 N. J. Eq. 345, 355; Burrwell v. Mandeville’s Ex’r (1844), 2 How. 560; Hardacre v. Nash, 5 T. R. 716; 101 Eng. Reprint 398; Hope, ex dem. Brown v. Taylor, 1 Burr. 269; 97 Eng. Reprint 308; Aitken v. Sharp, 93 N. J. Eq. 336, 346.

Counsel for complainant says that testator had a definite scheme for disposing of his estate. He gave to> his son property worth $18,000 absolute^, and to each of his daughters property valued at $9,000, but, in the case of his daughter Mrs. Alberts and Mrs. Wunderlich, he gave to them property valued at $18,000, because a suitable division could not be made. In each paragraph devising to his daughters the same identical language is used, excepting where a change was necessary in devising to two instead of to one, and also excepting the provision for sale by the executor.

The language relied upon by the defendants in support of their contention is contained in the habendum clause, “To* have and to1 hold the same jointly and receive the rents, interest, issues and profits thereof and enjoy the same as their own and separate property during the term of their natural lives,” &c. Eliminating the provision in this "paragraph for the right of way for water and sewer purposes, which was peculiar to the premises devised, the only differences between the devise to the daughters separately and the twoda lighters are, the word “jointly” used in the estate devised, using words in the plural as applied to the devise over after death of the life tenants, and the clause providing for a sale by the executors in case his daughters could not agree upon a division of the income.

I am satisfied that the testator intended to place all of his daughters, as well as his grandchildren living at the date of the death of either daughter, on an equal footing. He did not intend that his children should have more than a life estate, and that their children should not take in remainder if they did not survive their parents. He did not think in terms of great-grandchidren, but provided that on the death of either daughter without living children all grandchildren then living should take, share and share alike, thus including-children of his surviving daughters and son. The above proviso supplements th'e devise to his four daughters contained in paragraphs 1, 2 and 4, in all of which the testator stopped with the devise for life to his daughter or daughters, with remainder “to her child or children then living, share and share alike, forever,” by extending the devise to all of his grandchildren living- at the time of the death of any daughter, thus creating harmony in the disposition of the property devised to his four daughters for life.

Turning to the devises to the other 'two daughters, which are contained in separate paragraphs, there is little ambiguity. The difficulty that confronted the scrivener seems to have been that he was capable of drafting a clause of devise to one child clearly expressing the will of the testator, but when he was confronted with a devise to two he became involved and incapable of so phrasing the paragraph as to be unambiguous. His use of the word “jointly” was not intended to be employed in the legal sense of joint tenants, because it would be in opposition to the proviso which gives to all his grandchildren living at the time of his death of any daughter that which theretofore vested in her for life, and would be treating these two daughters differently from the other two. This the testator did not intend. The word “jointly” was used in the popular sense, viz., participated in or used by two or more; held or shared in common.” Funk & Wagnall’s Dict., tit. “Joint.”

My conclusion on this point is that the devise in the second paragraph created a tenancy in common between the two sisters.

Having determined that the two daughters took as tenants in common, and that the remainder over after the death of the two daughters is contingent, upon the death of Mrs. Alberts leaving children the remainder became vested, and théy took and held under the will of their grandfather freed from any right of other grandchildren; and, therefore, the deeds from the children of Mrs. Alberts could pass the fee to Mrs. Wunderlich in this one-half.

As to the interest devised to Mrs. Wunderlich, the remainder over as to her children is still contingent, and it has not vested in anyone; and the period of vesting in this instance must await until the decease of Mrs. Wunderlich; then, if she dies leaving children, the estate will vest in them; if she dies without leaving children, the estate will vest in all of testator’s grandchildren living at the time of her death. Therefore, the deeds given by Mrs. Wunderlich’s children to her pass no estate at this time.

A decree will be advised in accordance with the foregoing views.


source: Caselaw Access Project

author: Griffin, V. C.

license: Public Domain

text:
    Edward Beam et al., complainants, v. The Paterson Safe Deposit and Trust Company, defendant.
    [Decided July 7th, 1924.]
    1. Contingent interests in an estate are held, to be bound by the decree in a suit if such interests are represented in the litigation by a trustee or (in some cases) by the predecessor in estate, but where their is a life estate with vested remainders, the remaindermen are necessary parties to the suit.
    .2. Under the act of 1905, page 299, amending the Orphans Court act of 189S, sections 124 to 127, intermediate accounts) are placed on the same plane as final accounts, and contemplate a like decree touching their allowance "in lieu of the mere authorization that they be entered of record.
    3. Where to intermediate accounts exceptions were filed which were overruled, and the accounts were allowed by the orphans court, which accounts showed the retention of certain securities, the decrees on the intermediate accounts are res adjudAcata (except in certain cases mentioned in the statute).
    4. The final account was passed February 24th, 1921, and from the deciee entered an appeal was taken to the) prerogative court, and the bill herein was filed August 1st, 1921. The prerogative court has full jurisdiction over the parties) and subject-matter, therefore the questions arising on the final account cannot be considered 'here.
    On bill, &c.

      Messrs. Hutchinson & Hutchinson (Mr. Harold B Medina, of the New York bar), for Edward Beam, John CL Beam and Carrie S. Beam.
    JiV. William B. Beam, pro se.

      Mr. John W. Harding, for the defendant.
   Griffin, V. C.

The subject-matter of this litigation (with the exception ■of the shares of stock of the Brooklyn City Railroad Company, which will be hereinafter referred to) was passed upon in this court in the case of Carrie S. Beam, sole complainant, v. Paterson Safe Deposit and Trust Company, the present defendant, by Vice-Chancellor Stevenson, whose opinion is reported in 81 N. J. Eq. 38; and by the court of errors and ■appeals, on appeal from the decree advised by him (Idem. 195) : and by Vice-Chancellor Howell, on final hearing, whose ■opinion is reported in 82 N. J. Eq. 518, where he decided in favor of the complainant and-against the defendant; and in the court of errors and appeals, where the latter decree was reversed and-the bill dismissed. See 83 N. J. Eq. 628.

The facts touching the litigation in the former case are fully set forth in the foregoing opinions, and need not be here repeated.

The properly and interest of Mrs. Beam covered by said, litigation are derived from the twelfth paragraph of the will ■of her mother, Sarah A. Cooke, which reads as follows:

“Twelfth. The other five equal parts I give, devise and bequeath to the Paterson Safe Deposit and Trust Company, of the City of Paterson, in trust as follows: one of such parts is to be set aside for each of my five children, the income from each part is to be paid to the child for whom it is set aside, in equal quarter yearly installments, so long as he or she shall live; and upon the death of any •child the part set aside for such child is to be equally divided among the children of such child.”

Passing under this paragraph (and dealing only with the securities covered by said litigation) Mrs. Carrie S. Beam was entitled to receive from the defendant, as trustee, one-fifth of the income from the following securities:

1. Three Twenty-eighth and Twenty-ninth streets Crosstown R. R., New York City, first mortgage five per cent, bonds of $1,000 each.

2. Two five per cent, mortgage bonds of the Second Avenue, New York City, R. R. Co., of $1,000 each.

3. Two hundred and twenty-five shares of the Central Park, North and East River Railway stock.

The three foregoing securities were dealt with in the cases above referred to-.

In addition thereto, there also passed to her a one-fifth interest in two hundred shares of the Brooklyn City Eailroad Company, which shares, together with the securities above mentioned, in 1915, were divided into five parts, and thereafter one part was carried in a separate account in trust for Mrs. Beam under said twelfth paragraph.

The position taken by the complainants on opening the •case is that the decree in the former suit bound only Mrs. Beam as to the securities there litigated; and the remaindermen, not having been parties thereto, are not precluded from investigating with regard to the securities in the former suit; and that neither Mrs. Beam nor her children are bound in any respect by the former decree as to the Brooklyn city •securities.

The position taken by the defendant, as far as the five bonds and the two hundred and twenty-five shares of stock are concérned (which were the basis of the former litigation), is that “although' William B. Beam, Edward Beam and John C. Beam were not parties in the former suit, nevertheless, they had an interest in remainder, and were represented in that litigation by Carrie S. Beam, who was their predecessor in the estate.” Citing Woolsey v. Woolsey, 8 Buch. 517; Davison v. Rake, 18 Stew. 767; Dunham v. Doremus, 10 Dick. 511.

In Woolsey v. Woolsey, supra (at p. 525), Pitney, ordinary, after dealing with the rule as to proper parties, said: '“It results that such contingent interests are held to be bound if the interest be represented in the litigation by a trastee, or '[in some cases] by the predecessor in estate.”

In Davison v. Rake, supra, several legatees instituted suit in the orphans court for their legacies, and the question presented was whether they -were entitled to interest upon their legacies from one year after the death of the testator or from the admission of the will to probate. A residuary legatee, who was not a party to the suit in the orphans court, appealed to the prerogative court, and was the appellant in the court of errors and appeals. It was assigned as one of the grounds of appeal that he was not a party. Mr. Justice Depue, speaking for the court of errors and appeals, on page 771. said: “On a bill filed by a general legatee for the recovery of a legacy the residuary legatee is not a necessary party,” and on page 772 he said: “In suits by creditors or legatees, not involving the construction or effect of the residuary clause of the will, residuary legatees are interested, consequentially, only from the circumstance that the recovery of the debt or legacy will reduce the residue, and, under such circumstances, the executor is regarded as representative of all persons interested.”

In Dunham v. Doremus,, supra, Mr. Justice Dixon, in the court of errors and appeals, said (at p. 513) : “The established rule of equity practice is that estates limited over to persons not in esse are represented by the living owner of the first estate of inheritance.”

It seems perfectly plain that these decisions do not apply here. Under the clause above cited Mrs. Beam took a life estate, and her children took a vested remainder, subject to be opened to let in after-bom children.

In the case of Miers v. Person, 92 N. J. Eq, 17, Chancellor Walker said: “When the contingency is not in the person, but in the event or time of enjoyment, the interest is vested.” And in Clark v. Morehous, 74 N. J. Eq. 658, where the language of the will was not as plain as the will in question, Vice-Chancellor Howell, after stating that it is a well-known rule that courts will make every intendment in favor of vesting the estate, held that the children constituted a class and took a vested remainder on the death of the testator, subject to be opened to admit after-bom children of the life tenant. See, also, Aitken v. Sharp, 93 N. J. Eq. 336.

The conclusion I have reached on these authorities is that under the will of Mrs. Cooke there was a life estate given to Mrs. Beam with a vested remainder to her children, subject to be opened to admit after-born children. Upon this conclusion, the children of Mrs. Beam living at the time the prior suit was brought were necessary parties thereto. Their mother did not represent them in that suit, and they are not estopped by the decree therein.

The next question propounded in this: The defendant claims that by reason of the various accounts filed by it in the orphans court of the county of Passaic and passed and allowed by that court, the decrees entered therein involved the same subject-matter as this suit, and are res judicata on all of the defendants.

There were three accounts filed from December 31st, 1905, down to April 15th, 1912, in which the trustee, in one column, gave the par value of the securities, and, in another, gave what it termed the “present value” of the securities. The bill in the former suit was filed February 7th, 1912, being prior to the filing of the last of the three accounts just referred to. No exceptions were filed to these accounts, although it plainly appeared in the bill that Mrs. Beam had knowledge of the fact that the securities mentioned in that suit had greatly depreciated in value and were not of the value given in the account.

In the fourth account, covering a period from April 15th, 1912, to April 15th, 1914, on one side the accountant gave the par value of the securities, and, on the other, the inventory value, thus substituting for the words “present value,” as appeared in the three prior accounts, the words “inventory value.” No exceptions were filed to this account, and it was regularly passed by the orphans court.

In the fifth account, covering a period from April 15th, 1914, to April 15th, 1915, under the head of “principal fund depreciation,” it showed the inventory value, amounting, on April 15th, 1914, to .$150,500, and a depreciation m the-various securities amounting to $56,969.50, leaving a balance of $93,530.50. The accountant then sets out in another clause the securities and their values, which make up the total of $93,530.50. It then states as follows:

' “This estate, for the benefit of the. five beneficiaries therein, has, for the purpose of economy, been kept and reported to-the orphans court as one account-. The trustee, as of May 1st, 1915, has caused a reappraisement of the securties. on hand to be made at. the market value as of that day, and has divided the said estate info five parts, according to the figures hereafter shown and entitled ‘distribution Sarah A. Cooke trust as of May 1st, 1915.’”

And in the table annexed a division is shown ratably among the five children of the testatrix, of whom Mrs. Beam is one. Exceptions were filed to this account by Mrs. Beam, and the court being of the opinion that the exceptions were not well taken, on July 30th, 1915, ordered that “said account be in all things allowed as reported, and that there is a balance of corpus amounting to the sum of $93,530.50 remaining in the hands of said accountant to be disposed of according to law.”

The exceptions were filed by Mrs. Beam, and are as follows:

“1. The account sets forth in schedule C a depreciation of $56,969.50 in certain securities, without any explanation concerning how and when said depreciation occurred. The accountant filed an intermediate account in Eebruary, 1908, one in April, 1910, and another in April, 1913, beside the present one, to which exception is herein made. Each of said accounts, except the present one, show the corpus of the estate to be worth about $151,056.58, and the decree of the court m each case so declared. None of the said accounts disclosed any depreciation, and since the accounting of 1914 there has been no material depreciation in the assets of the estate.

“3. In the formation of the trust in question the trustee violated the express provisions of said will of said testatrix in creating but one trust fund in place of five> as in said will ordered.”

The prayer'of the exception is that the account be disallowed as filed, and that the trustee be required to account to the beneficiaries of the estate for the full amount shown to be in the hands of said trustee by the decree dated May 14th, 1914, and that the exceptant may have other relief.

While the first exception is inartistically drawn, it pointed to the question of the good faith and reasonable discretion of the trustee in continuing the investments, thus calling on the trustee to bear the burden cast by law upon it to explain its action in holding the securities which were so declining, as stated in Beam v. Paterson Safe Deposit and Trust Co., 81 N. J. Eq. 195. Prior to this last accounting Mrs. Beam, having insisted that the accounts be kept separate according to the terms of the will, the subsequent accounts separated the fund into five parts, and the trustee thereafter accounted for the fund of Mrs. Beam separately. The first of these accounts is from January 7th, 1915, to the 15th of April, 1917. This account overlaps the last account, as that accounting was down to April 30th, 1915. However, the accountant charges itself with the amount of assets “as per appraisal on division on accounting, April 30th, 1915, $18,706.10” (which is one-fifth of the $93,530.50, which was the total fund held in trust for the five children). This account added the income from January 7th, 1915, and deducted the disbursements from February 23 d, 1915, all of which was regular. In this account the par value of the various securities is set forth on one side, and the appraised value on the other. To this account Mrs. Beam and her two sons, William and John, excepted, which exceptions were overruled, and an order entered, on May 24th, 1917, that the account be in all things allowed as reported.

The first exception is as follows:

“The account does not explain depreciation in the value of the corpus.”

The second exception was substantially the same as the first exception to the last account.

The prayer is “that the account be disallowed, and that the trustees be required to account to the said beneficiaries of said estate for the depreciation in the value of the share of Carrie S. Beam subsequent to the decree of April, 1914.”

These latter exceptions substantially put in issue the question of the exercise of good faith and reasonable discretion.

The next account was from April 15th, 1917, to April 15th, 1919. This account, under schedule C, sets forth how the principal fund of the trust is invested, and places the par value on one side (without stating that it is par), and, on the other side, a column of figures without any caption as to value. To this account exceptions were filed by Mrs. Beam, William B. Bteam and John C. Beam, and a motion being made to strike from the records said exceptions on the ground that the same were vague, uncertain and scandalous, and not proper exceptions in accordance with the statute in such case made and provided, the court ordered “that said exceptions be disallowed and removed and stricken from the records of this court,” and also' ordered “that the account be in all tilings allowed as reported, and that there is a balance of corpus amounting to the sum of $1S,706.10 remaining in the hands of said accountant to be disposed of according to law.”

On January 15th, 1921, the trustee presented his petition to the orphans court for discharge., and on the 10th of February, 1921, the court ordered “that it be relieved and discharged from all further duties,” &c., “except accounting for and paying over the money or assets received by it by virtue of its said office.” Thereafter the trust company filed its final account from the 15th day of April, 1919, to. the 5th day of January, 1921, and, in schedule C, set forth the principal fund of said trust and how invested. On one side the figures set forth the par value, and, on the other, the “book value.” To this accounting exceptions were filed by William B. Beam and John C. Beam., which were overruled in their entirety, and it was ordered “that the account be in all things allowed as reported, and that there is a balance remaining in the hands of the accountant amounting to $18,-706.10 to be disposed of according to law, which balance is corpus at accountant’s book value.”

From the decree on this last accounting an appeal has been taken by William B. Beam to the prerogative court, and since which decree the defendant has turned over the securities to the new trustees.

The defendant also> makes the point that all of the accounts approved showing the retention of the securities involved in the first suit, and the approval of each of these accounts upon due notice, was res adjudicada as to> the propriety of the trustee’s action in retaining the securities. Citing Re Slater's Estate, 88 N. J. Eq. 296; Exton v. Zule, 1 McCart. 501; Search’s Admr., v. Search’s Admr., 12 C. E. Gr. 137.

In Re Slater’s Estate, supra, Vice-Chancellor Learning had before him a case involving two accounts, one intermediate and the other a final account. To the intermediate account no exceptions had been filed, and the account was allowed by the court as reported, and the court’s decree to that effect was signed and entered. On the final account being reported for settlement, exceptions were filed which included objections to both the intermediate and final accounts. At the hearing the orphans court entertained the exceptions which were directed to the intermediate account as well as to the final account, and decreed that the intermediate account be vacated, set aside, and for nothing holden, and that the intermediate and final accounts be restated in conformity with the specific adjudications touching the several matters of charge and credits. The vice-chancellor dealt with, sections 124 to 127 of the Orphans Court act of 1898 (P L. 1898 p. 760), as amended by the laws of 1905, page 299, and held that, as a result of the amendment, intermediate accounts of an ex-’ ecutor were placed upon the same plane as final accounts, and contemplated a like decree touching their allowance in lieu of the mere authorization that they be entered of record. In the act of 1905, administrators and trustees were treated the same as executors. In the case before him, as above stated, no exceptions were filed to. the intermediate account, and the court decided the case under section 125. Exceptions to the intermediate accounts in the1 present case having been filed, the case is within section 126, where, in general language, it deals with the settlement of the accounts of '“executors, administrators, guardians and trustees.” This means accounts which are to. be settled, and includes the intermediate and final accounts of executors, administrators and trustees, but includes only the final account of a guardian, because that is the only account of a guardian which may be settled. Thus, when the orphans court overruled the exceptions filed to the intermediate accounts and allowed the accounts as reported under section 127, the decree of allowance “is conclusive upon all parties,” and operates to exonerate and forever discharge an executor “from all demands of creditors, legatees or others, beyond the amount of such settlement * * * excepting, also;, in cases where a party applying for a resettlement shall prove some fraud or mistake therein, to- the satisfaction of the said orphans court,” and the application for resettlement, as held by Vice-Chancellor Learning, is by-petition and rule to show cause.

The notice of the settlement of the various' accounts was given in accordance with the provisions of the statute. This notice operates as constructive notice to all parties interested in the estate. In contemplation of the law they are all before the court, and all entitled to except to the account and be heard before the court. The decree of the court upon final settlement and allowance- of the account is conclusive upon all parties, except in special cases enumerated in the statute. Exton v. Zule, supra.

In the present case regular decrees allowing the account were entered, while the trusts for the- five beneficiaries were kept in one account. On the division of the account into five parts, in 1915, all of the securities referred to in the former, chancery litigation were set out, and their- depreciation was shown .under the title, “Cooke Trust, Principal Fund Depreciation, April 30th, 1915.” Under this head was also- shown the, two' hundred shares of Brooklyn City Railroad- Company, which, for the first time,.has been brought into- this litigation. The.total amount of the depreciation was deducted from the. inventory value, showing a balance of $93,530.50, following which is a statement showing how ihe principal fund was invested.

In the case of Hill v. Hill, 79 N. J. Eq. 521, 539, Pitney, ordinary, said: “It is established that the jurisdiction of that court [the orphans court] over the subjects committed by the statute to its cognizance has a general jurisdiction similar to that of the chancery and prerogative courts, and that its authority over accounts of trustees under wills- is as ample as that of the court of chancery.” Citing cases. And on page 540, referring to the Woolsey Case (which originated in the-orphans court, and passed through the prerogative court to. the court of errors and appeals, in a matter- of accounting), he sa]rs: “* * * and that court required the account of the executors to- be restated in a manner to give effect to an. equitable estoppel arising out of the transaction between the executors and beneficiaries. Afterwards, an attempt being made by hill in equity to> open the account as thus restated, it was held by the court of chancery, and affirmed by the court of errors and appeals [Woolsey v. Woolsey, 71 N. J. Eq. (1 Buch.) 609; 72 N. J. Eq. (2 Buch.) 898], that the matter ivas res judicata, because of the former decision; that the orphans court had as ample jurisdiction to examine into the account and deal with it on equitable principles as was possessed by the court of chancery, and that the executors might have availed themselves in the orphans court of the matters they set up in the subsequent equity suit as ground for relief.” See, also, Pyatt v. Pyatt, 46 N. J. Eq. 285," Woolsey v. Woolsey, supra; Be Slater’s Estate, supra.

Here the complainants could have obtained full relief in-the orphans court on exceptions to the account of the trustee-with respect to the securities mentioned in the- former suit as well as to the Brooklyn City Railroad Company shares; and,, in fact, exceptions were filed, in some instances, by Mrs.. Beam, and, in others, by her sons, the remaindermen, which exceptions were overruled and no appeals were taken.

In view of the foregoing authorities, I am of opinion-, that the decrees of the orphans court on the settlement of all of the accounts down to the final account are res judicata, and that the same subject-matter cannot be relitigated in this court.

The final account'was passed February 34th, 1931, and the-bill in this cause was filed August 1st, 1931. To that account exceptions were filed, which were overruled and the-account allowed as reported. From the decree there entered an appeal has been taken to the prerogative court, which court, has full jurisdiction over the- parties and, subject-matter, therefore the questions arising on that account cannot be considered- in this case.

In view of the fact that I have found that the decrees of the orphans court are re* judicata, I have not deemed it necessary to consider the other evidence in this cause.

I will advise a decree that the bill be dismissed,


text:
    Scala Realty Company, complainant, v. Bayonne Ice Company, defendant.
    [Decided July 11th, 1924.]
    1. Many acts which directors of a corporation may do outside the scope of their powers become ratified and validated by the acquiescence of the body of shareholders, and acquiescence in the assumed act of agency of another, when .the acts of the agent are brought to the knowledge of the principal, is equivalent to an express authority.
    2. If a corporation possesses the advantages and benefit of an agent’s act, with knowledge of the facts whereby such benefits have accrued, it will not be heard afterwards to disown the intervening-agency because of informalities in the execution of his powers.
    3. Where it is claimed that a bond and mortgage of a corporation were executed without authority, and remained quiescent for seventeen months, but all the stockholders knew of it and made no objection until after the bill was filed, the corporation is estopped from setting up the defense that a resolution was not passed by the board of directors authorizing its execution, and also that he who signed as president Was not the president of the corporation, and even if this was not so, the vendor’s lien for the purchase-money remains.
    On bill, &C.

      Mr. Richard Boardman, for the complainant.

      Messrs. Lazarus, Brenner & Vickers, for the defendant.
   Griffin, V. C.

The bill in this canse was filed to foreclose a mortgage made by the defendant to the complainant. The defendant sets np in its answer that “it never executed or delivered a bond and mortgage to the complainant, and that no authorized officer ever executed a bond and mortgage to- the complainant; that the premises mentioned in the bill of complaint purchased by the defendant from the complainant have been fully paid for except for a small amount, and that no mortgage was executed or delivered to secure such amount.” These are the pertinent defenses.

I will take up the first defense—that the bond and mortgage were not executed by authority of the defendant:

The defendant corporation is a family affair, which appears to have consisted of Mr. Seala., Mr. Tozzi and his wife (who is a daughter of Mr. Seala.) and Lena Seala, another daughter of Mr. Seala. Lena Seala ivas the secretary, and, on organization, one Smith appears to have been the president, but shortly after the organization he dropped out, and it is alleged on one side that Mr. Seala was the president during the transactions in question, and, on the other side, it is 'denied. It is perfectly apparent, however, that Mr. Seala was recognized as president, because he signed the certificates of stock. Mr. Tozzi appears to have been manager of the corporation, completely dominating and controlling all its actions. The minutes of the meetings were not written up in the minute book, but were kept on sheets of paper. They do not show the election of Mr. Seala as president, and, if I recall aright, they do not shoiv the election of Mr. Tozzi as president, although he claims to have been president a.t the time. There is no resolution authorizing the making of this mortgage. The Seala. Eealty Company owned the premises in question. Some time before the mortgage was made, the Bayonne Ice Company, or Seala, or both, commenced the construction of a building for an ice plant on the premises, and about four months before the making of the mortgage the defendant entered into possession and began operations. On the 17th day of October, 1921, the complainant made this deed to the defendant, the consideration price being named as “one dollar,” but the actual consideration is stated indifferently as “fifteen thousand,” or “fifteen thousand five hundred dollars.” This consideration was paid by the defendant taking the lands subject to existing mortgages, amounting to $9,975, and giving the purchase-money mortgage in question for $5,575. The deed, bond and mortgage were drawn by a Mr. Stem, a member of the bar of New Jersey, practicing in Bayonne, and the same were executed in the defendant’s office, Mr. Scala signing as president, and his daughter attesting and making proof as secretary, in the presence of Mr. Tozzi. The deed, bond and mortgage were then delivered. Mr. Tozzi says that he was present and saw the papers executed, but paid no attention to the bond and mortgage. On the contrary, it is testified to- by Mr. Scala, and particularly by Mr. Stern, that Mr. Tozzi read over the bond and mortgage very carefully, word for word, and after that was done, it was executed by Mr. Scala, as president, and his daughter, as secretary. And the defendant then and there gave a check to Mr. Stern in payment of his bill. Mr. Stern, however, is doubtful whether the cheek was signed by Mr. Scala or by Mr. Tozzi.

Without going further, and assuming that the only objection to the -mortgage is that it was executed without authority, the point arises as to whether Mr. Tozzi and the other stockholders are not estopped from setting up the want of power in Scala to act as president and affix the corporate seal-. No objection was made to this mortgage until this bill was- filed, some seventeen months afterwards, during which interval Scala and his son-in-law, Tozzi, have ceased to be friends and are engaged in litigation in other courts. The question presented for solution on this point is whether the defendant has not ratified' the transaction, and is' not es-topped from setting up the defense that a resolution was not passed by the board of directors authorizing the execution of this bond and mortgage, and also that Mr. Scala' was not the president. ■ ■

As to the .question of his not being president, the evidence shows that he was recognized as such and signed the certificates -of stock. ■ The minutes were so loosely kept, and there were so few meetings, that they lacked that evidential force that might be attributed to them had they been kept in the proper.manner.- - ' '■ • .

The defendant cites Aerial League of America v. Aircraft Fireproofing Corp., 117 Atl. Rep. 704; Bennett v. Keen, Rec’r, 59 N. J. Eq. 634 Metropolitan Telephone, &c., Co. v. Domestic Telephone, &c., Co., 44 N. J. Eq. 568, to support the rule that the mortgage is invalid unless executed under the authorization of the board of directors.

In the Aerial League of America Case, supra, the complaint was on an oral agreement made between Woodho-use, as agent for the plaintiff, and Kerwood, as agent for the defendant. The defense was that Kerwood had no authority from the defendant to modify the written contract, or to-make a new contract for the one thousand six- hundred square feet of space, and the court, finding that Kerwood had no-such authority, reversed the Atlantic circuit court.

In Bennett v. Keen, Rec'r, supra, it appeared that Theodore E. Beck and his three sisters held all the stock of a-corporation and constituted the board of directors. Theodore was president, and, without authority from the bo-ard of directors, made a mortgage upon the real estate of the corporation to Bennett & Company “to secure; upon certain real' estate of the corporation, its existing indebtedness to- them, and such indebtedness as should be owning to- them at one-year from its date.” Advisory Master Williams held that “it. seems to be settled in this state that the president of a business corporation does not derive power to mortgage its lands-, by implication from the ordinary duties of his office.” Sub-, sequently, a resolution was passed, while the corporation was. insolvent, appro-ring and confirming the action of the president in executing and delivering the mortgage; and- the mortgage was recorded the next day; -and the advisory master held that the resolution of ratification could, o-nly avail against intervening rights in case the corporation was then competent to make a valid mortgage, and that, as at the time-of the ratification, the directors were not in a position to- give, a valid, mortgage to secure an existing creditor- -because off-the insolvency of the corporation, he held .the mortgage-invalid as against the receiver. The decree so advised by him-was affirmed.by the court of errors and appeals. .. .

While there does not appear to have been a meeting of .the-, board of directors, at which a resolution was passed to- exe-, cute the bond and mortgage; yet the facts as to-the giving of the deed and the making of the bond and mortgage were known to- all the stockholders. Its business was loosely conducted, To-zzi having been in sole control and management, .as heretofore stated. In the case of Breslin v. Fries-Breslin Co., 70 N. J. Law 274 (283), Mr. Justice Pitney, speaking for the court of errors and appeals, said: “It follows that many acts which the directors may do outside the scope of their powers become ratified and validated by the acquiescence of the body of shareholders, and, in general, the body •of shareholders can ratify and confirm any act done by the •directors or other officers of the corporation without a precedent authorization which the shareholders could have authorized originally.”

In the case of Throp v. Payne Bros., Inc., 86 N. J. Law 304, the court of errors and appeals, speaking through Mr. Justice Minturn, said: “Acquiescence in the assumed agency of another, when the acts of the agent are brought to the knowledge of the principal, is equivalent to an express authority.’5 He says further: “The rule of law is unquestioned that, if a corporation possesses the advantages and benefits of the agent’s acts, with knowledge of the facts, whereby .•such benefits have accrued, it will not be heard afterwards to disown the intervening agency because of informalities in the execution of his powers. In such a situation the act of ratification relates back, and operates with the same effect as previous authority, the relation o-f principal and agent being treated as existing ab initio.”

The transaction between the parties in this case was the •sale of lands, the complainant giving to the defendant a deed therefor and taking back a purchase-money mortgage as part of the consideration. All the stockholders had knowledge of the transaction, and, with that knowledge, continued in possession of the lands for about seventeen months down to the ■filing of the bill without questioning the validity of the bond ■and mortgage-; and, on the filing of the answer to- the bill, •defendant, as I understand it, for the first time, set up this •alleged infirmity, a-t the same time retaining title to- the property conveyed. Thus, it is endeavoring to retain the advantage and benefits arising from the conveyance and repudiate ihe purchase-money mortgage for a portion of the consideration.

In the case of Boorum v. Tucker, 51 N. J. Eq. 135 (145), Vice-Chancellor Pitney said: “At law, it [the mortgage] is also a conveyance of the land to the vendor in pledge. So, that, if we compare the case of a mortgagee of a purchase-money mortgage upon land coming into a court of equity .and asking for foreclosure against the mortgagor and his. wife, and that of a vendee of land without mortgage coming into the same court to enforce his so-called vendor's lien against the vendee and his wife, we shall find it difficult to distinguish between the cases—at least I do. In short, it seems to me that the execution of a mortgage to secure purchase-money is, in equity, a mere continuance of the lien,, and it is that circumstance, and that alone, that.gives it efficiency in this court to bar dower, or, rather, gives it precedence over dower." ,

The conclusion that I have reached is that the- defendant, by its acquiescence, is estopped from asserting that this bond and mortgage were improperly executed, but, even if this conclusion had not been reached, still the complainant has his vendor’s lien for the unpaid purchase-money.

Touching the second defense, namely, that the mortgage was. given for the accommodation of the complainant, and that at the time of the mortgage there was nothing ctoe excepting a small amount. To support the theory of payment the defendant’s position is this—the building on the lands was erected for the use of the defendant; the defendant says that while the purchase price agreed upon was $15,000, said sum was paid as follows:

Mortgages on premises ................... $9,925.00

Taxes, past clue ......................... 2,400.00

Paid to materialmen..................... 876.31

Material and labor on building paid by check, 1,800.00

In the statement of disbursements furnished the total amount is given as $15,071.31, but in that statemeut the mortgages are estimated at $10,000. It is significant that on this statement it appears that the latest item was paid October 5th, 1921, by check to Scala Realty Company, $400. No moneys were paid thereafter by the defendant to the complainant, and the deed, bond and mortgage were executed on October 17th, 1921, twelve days after the said last payment. 'Therefore, the only theory upon which the defendant can stand is that Mr. Scala asked Tozzi to endorse his note, and 'Tozzi declined. He then asked to have a mortgage made which he could assign and raise money on. These facts are not only denied by Scala, but the figures themselves tend greatly to disprove Tozzfis story. Scala says the consideration price wos $15,500, the defendant to assume the payment ■of the mortgages and the taxes. The mortgages on the premises at the time of the sale amounted to $9,925; the purchase-money mortgage given was $5,575; thus making the purchase price, as stated by Scala, $15,500. It seems strange that Scala should desire an accommodation mortgage for $5,575. Why add the seventy-five—why not make it $5,000, or $5,500 dollars? Why make it the precise figure, which was due, as unpaid purchase-money?

The burden of proof is on the defendant, and not only has it not borne that burden, hut the evidence is strongly the ■other way; and touching the various items shown on this statement, aggregating $876.31, and the item of $1,800, Mr. Scala swears that they have no relation to the purchase price.

A decree will be advised for the complainant.


author: Foster, V. C.

text:
    Sarah Block, complainant, v. P. & G. Realty Company et al., defendants.
    [Submitted April 8th, 1924.
    Decided April 11th, 1924.]
    1. The devolution of real estate in New Jersey is regulated by New Jersey law.
    2. A decree of divorce in New Jersey bars the wife’s dower in the husband’s lands, and where a wife obtained a decree of divorce from her husband in another state her dower is extinguished as to lands in this state owned by her former husband, irrespective of any provisions of the laws of the state where the divorce was obtained.
    On bill, &c.

      Mr. Isaac Spangenthal, for the complainant.

      Mr. Sol Cohen, for the defendants.
   Foster, V. C.

This is an action for the specific performance of a written contract for the sale -of real estate situated -in the city of Newark. Defendants refuse to take title to the premises in question and set up in their answer as an excuse for their refusal that the premises in question were purchased by one Neil C. Jenson in November, 1922. The answer further sets up that by virtue of a decree of the circuit court of Cook county, in the State of Illinois, made on March 19th, 1923, in a case where Christina D. Jenson was complainant and the said Neil C. Jenson was defendant, it was decreed that the bonds of matrimony existing between the said parties by reason of their marriage on March 31st, 1893, in Illinois, should 'be dissolved, because defendant willfully deserted complainant. The answer further sets up that by virtue of the statutes of the State of Illinois (Rev. Stat. 1845 p. 199 12) rights of dower are not barred by reason of a divorce if the husband of the doweress lias committed the acts upon which the decree of divorce is based, and defendants therefore aver that by reason of the laws of Illinois the rights of the said Christina D. Jenson to dower in the lands of Neil C. Jenson, her husband, and particularly in the premises in question, still remains in full force and effect. The bill alleges that Neil C. Jenson has recognized the validity of the decree of divorce, for in the deed conveying the said premises from himself to Philip Korn and wife, dated April 28th, 1923, he described himself as unmarried.

Complainant has now moved to strike out the answer on the ground that it does not present 'any defense to this action, because under the laws of this state, in which the premises in question are located, the divorce of Christina D. Jenson from her husband barred any rights of dower that she had in the premises in question, and that the laws of this state, 'and not of the State of Illinois, are controlling in the situation, and that there is no dower 'right in Mrs. Jenson to affect the marketability of the title which complainants tendered to the defendant for the premises in question by a warranty deed, as required by the terms of the contract.

It will be seen by this recital that the question thus presented for determination is whether the laws of the State of Illinois or of this state are to control in the matter of dower in lands in this state.

Under our statute relating to dower the widow of any person dying intestate, &e., &c., shall have dower in any lands in this state whereof her husband was seized of an estate of inheritance during the coverture. 2 Comp. Stat. p. 2043 § 1.

The statute, it will be observed, requires the existence of three elements to establish a right of dower in lands in this state, vizi: (1) the marriage of the parties; (2) the seizinof the husband, and (3) the continuation of the marriage until the husband’s death.

A widow is defined as a woman who has lost her husband by death and is still unmarried. Stand. Diet.

In the present situation the marriage between Jenson and his wile was dissolved by the decree of divorce. Mrs. Jenson is therefore no longer his wife, and, unless she remarried him, could not be his widow at his death.

The continuation of the marriage is an essential element of the estate, and it must subsist at the death of the husband in order to entitle his widow to dower.

In Pullen v. Pullen, 52 N. J. Eq. 10, Chancellor McGill held, “A woman cannot have dower who> is not the wife of the man, in whose lands she claims it, at the time of his death.” By the decree of divorce, Mrs. Jenson ceased to be the wife of Jenson in March, 1923, the date of the decree.

It is the general rule that the widow’s right of dower in her husband’s lands is determined by the law of the state where the property subject to dower is located.

See 19 Corp. Jur. 462, 506, where cases in the various states are collected. See, also;, Burnet v. Burnet, 46 N. J. Eq. 144; 2 Bish. Mar. & Div. § 1633.

And it has been held generally that a valid divorce from the bonds of matrimony, for the fault of either party, cuts off the wife’s right of dower, and the husband’s tenancy by the curtesy, unless the same is expressedly or impliedly preserved by the statute of the state in which the real estate is situated. Barrett v. Failing, 111 U. S. 523.

There is no such express preservation of dower in our statute, and I am unable to find any such preservation that can be implied from its provisions.

As there is not outstanding in Mrs. Jenson any right of dower in the premises in question, it follows that the defense presented by'the answer is without merit, and does not justify defendants in their refusals to perform their contract and to take title to the property. The motion to strike the answer must prevail, and the decree for specific performance should be granted.


author: Buchanan, V. C.

text:
    Jacob Kron et al., complainants, v. Trenton Automotive Collateral Company, defendant.
    [Decided May 20th. 1924.]
    1. To warrant injunction against' a corporation under the provisions added to the sixty-fifth section of the Corporation act by the amendment (P. L. 1912 p. 535), three things must be shown:

      a. That the company’s business has been conducted at great loss and prejudice to creditors or stockholders;

      b. That the business is being so conducted; and

      c. That its business cannot be conducted with safety to the public and advantage to the stockholders.
    2. Requirement (a) is not shown by proof that the company’s capital has been diminished by fraud in the original corporate organization, prior to commencing “its business.”
    3. Requirement (b) is not shown by proof of failure to recoup past losses.
    4. Requirement (5) is not shown by proof that stockholders are not receiving dividends because of insufficient corporate income.
    5. Requirement (c) is not shown by proof that corporate income is, and will indefinitely continue to be, so small as to preclude payment of any dividends on common stock and of more than a fraction of dividends on cumulative preferred stock.
    0. The statute mentioned cannot be utilized, in substitution for direct proceedings, to investigate or punish alleged corporate violations of criminal or gn.em-eriminal statutes.
    7. The appointment of a receiver for a corporation at the suit of stockholders, under general equity jurisdiction, is warranted only where it is necessary to prevent a wiasting or fraudulent diversion of the corporate assets, which the stockholders are powerless themselves otherwise to prevent.
    On final hearing.

      Mr. Merriii Lane, for the complainants.

      Mr. Linion Satterthwaite, for the defendant.
   Buchanan, V. C.

This is a bill for the winding up of the defendant corporation, filed by two of its stockholders, under the sixty-fifth section of the Corporation act, as amended by P. L. 1912 p. 535. It is not alleged that the company is insolvent or has suspended business, but that the facts show a situation coming within the scope of the additional statutory grounds provided bj1- the 1912 amendment.

The bill contains a prayer for general relief, and, on the argument, complainants contended that a ease had been made, justifying the appointment of a receiver under the general equity jurisdiction of the court.

DeaEng first with the matter from the standpoint of the original theory of the bill, the proceeding being statutory, the legislative requirements must be proven as the basis for a decree enjoining the further exercise of the corporate franchises and the appointment of a statutory receiver. This necessitates a judicial determination that the company’s “business- has been and is being conducted at a great loss, and greatly prejudicial to the interest of its creditors or stockholders, so that its business cannot be conducted with safety to the pubic and advantage to the stockholders.”

It is apparent from the proofs that the progenitors of the corporation organized it with the intention of looting it, and successfully carried out that intention. Some $250,000 par value of stock was issued, for which the company- received only about $50,000. Obviously, this was a serious impairment of the company’s capital—a loss of eighty per cent, thereof—although perhaps strictly it can scarcely be said that this loss was the result of the conduct of its business—that is, the ordinary business which it was to carry on under its certificate of incorporation. It occurred in the promotion and organization of the company, and before it began to carry on its intended business operations. There were, however, additional losses and impairment of capital, incident to the payment of dividends out of capital in default of income.

Assuming, then, that it is sufficiently shown that the business “has been conducted at a great loss,” &c., nevertheless, it must also appear that (in the absence of insolvency or suspension of business’) it is being so conducted. In this behalf the proofs fail, to my mind. They show that the intentional fraud-doers have left, or been removed from, the corporation, and that for a year or so past the company has been doing business with a small but slowly increasing net income, notwithstanding the handicap of the partial restraint imposed by the pendente lite order of this court.

It is true that it1 appears the present directors (with perhaps one or two exceptions) were directors at the time of the wrongful acts above mentioned; that the losses to the company were, in large part, if not entirely, the result of gross negligence on the part of these directors, so that they are doubtless personally liable to the company therefor, and that they have not taken, and apparently do not intend to take, an}1, steps to reimburse the company in that behalf. It may be said, therefore, that these directors are continuing a loss to the company, in the sense that they neglect and fail to recoup the loss already sustained.

That, however, in my view, is not the thing which the legislature had in mind. It is clearly quite a different thing from the continuing conduct and operation of the company’s business at a loss, which, if not terminated, will result in insolvency. This latter is my interpretation of the statutory language. The original design of the statute was to provide for the enjoining and winding up of a corporation which had become actually bankrupt, or, bjr reason of inability to function normally by paying its current bills and keeping its business going, become so moribund as to make bankruptcy an inevitable result in the ordinary course of events, and the purpose was to preserve to the creditors—and stockholders, too, if possible—the assets that would inevitably otherwise be lost to them.

The 1912 amendment contemplates a point just anterior to those expressed in the original act, in the commercial descensus Averni, but still, nevertheless, as must be judged from consideration of the history and design of the legislation, a point at which recovery has become, as a practical matter, impossible—a point where nothing but the intervention of the state can prevent capital loss to stockholders or creditors, or both, namely, that point in the business career where the business "has teen” and "is being" conducted at great loss and "cannot be” in future conducted with safety, &c.

It is also argued that the proofs show that although the corporation is earning net income at a gradually increasing rate, nevertheless it cannot, as a matter of simple mathematics, ever hope to pay full dividends upon its cumulative preferred stock, or any dividends on its common stock, and that hence, the stockholders are suffering, and will continue to suffer, loss in the sense that they obtain no income.

Assuming the correctness of the premise (as to which I think there is at least some doubt, inasmuch as it does not appear that all the stock is held by persons entitled to be treated as holders of full paid stock—indeed, the contrary appears as to some of it), still, in my view, that loss of income, or failure to obtain income, by the stockholders, is not the thing mentioned or contemplated by the legislature when it speaks of the “business of the company” being conducted at loss. The two things are clearly quite different, as I have already had occasion to hold in one or two unreported cases. Morse v. Metropolitan S. S. Co., 88 N. J. Eq. 325, does not hold to the contra^. The determination there is simply that the evidence (without specifying the nature of it) showed that the company’s business had been and was being conducted at a great loss and greatly prejudicial to the interests of the creditors or stockholders. There are many corporations which have not paid a dividend on common stock for years, and cannot be expected to do so in many more years, but I have not known of any attempt to use that as a ground for winding up or receivership, in the absence of bad faith in the corporate management.

It is also urged that the company’s business operations are being conducted usuriously; that it exacts usurious interest under the guise of service charges; that each instance renders it liable to a penalty of $200 at the instance of the state, and that this brings it within the statutory language as to> loss, &c. Here, again, assuming the premise, the conclusion is unsound. The true conclusion from that premise would be, not that the company is operating at a loss, but that it is operating at the risk of loss. That might be said of almost all corporations. There are many corporations organized and openly operating in this state similarly to defendant, and have been for years, but no proceedings of the kind suggested by complainants have been brought for the recovery of penalties.

Assuredly, it was never intended by the legislature that this court should be either required or permitted to exercise indirect^, under the cloak and guise of this statute, a criminal or gwasi-criminal jurisdiction. If there, indeed, exist just ground for action by the state in this behalf against this corporation, such action must be taken by direct proceedings.

Now as to the question of appointing a receiver under1 the general equity powers of the court. I find no fraud on the part of the present directors. Since they realized about a year ago what had been done in the looting of the corn-company and the unlawful payment of dividends they waked up and there has been no mismanagement by them since— no conduct of the business for the benefit of some stockholder at the expense of others. The situation is very different from that which is set forth in Morse v. Metropolitan S. S. Co., 87 N. J. Eq. 217. The directors here have been full and frank in their disclosures of the corporate affairs, and have voluntarily given every assistance in the present investigation in the way of production of evidence. If the stockholders are dissatisfied with the corporate management they can presumably elect a new board and new officers. There is no evidence that the ¡present directors control the majority of stock. Only one additional stockholder has intervened in the present proceeding, and it would appear from the evidence that the stockholders generally are satisfied with the present board and its management.

It is, of course, true, as has been mentioned before, that the directors seem undoubtedly liable for the dividends unlawfully paid. That, however, is not a liability to the corporation, but to the injured stockholders, and enforceable only at the suit of the stockholders against the directors. Fleisher v. West Jersey Securities Co., 84 N. J. Eq. 55.

It may be that the directors are liable to the corporation in connection with the loss on the sale of stock. If there be ground for suit in that behalf, the stockholders can elect new directors who will have the company bring suit, or, in default of proper action in that behalf, stockholders may bring suit in their own names in behalf of the company. This liability, if it exists, is for a single past matter and does not involve present continuing misconduct. I clo not think that this court should intervene by the appointment of a receiver under the circumstances shown.

The appointment of a receiver for a corporation at the suit of stockholders, under general equity jurisdiction, is warranted only where it is necessary to prevent a wasting or fraudulent diversion of the corporate assets which the stockholders are powerless themselves otherwise to prevent.

A decree will be advised dismissing the bill.


text:
    William J. Boehm, executor, &c., complainant, v. Mary Domagauer Rieder et al., defendants.
    [Decided May 24th, 1924.]
    1. Bill was filed for the construction of a will, and later an executory agreement was made in settlement, being essentially a contract of purchase and sale of lands and interests in lands. In such case decree for specific performance of the agreement cannot be made on motion and affidavit; the new cause of action must be incorporated in the record by supplemental pleadings, and be brought to final hearing.
    2. On an application to be made a party, under rule 13 it is not necessary that the applicant prove conclusively that “he has an interest or title which the decree will affect,” it is sufficient if he show a meritorious claim.
    3. On a contract of purchase and sale of a life estate and a dower interest, semble, that the purchaser is not excused from payment by reason of the death of the life tenant and dowress prior to the date for consummation.
    4. In such a case, where payment was to be part cash and part conveyance of lands, semble, that the administrator and the heirs-at-law of the deceased dowress and life tenant are entitled to decree for specific performance.
    On motion, &e.

      Messrs. Slamler, Sicmler & Koestler, for the complainant.

      Mr. Abe J. David, for the defendants.
   Buchanan, V. C.

Complainant’s bill is for the construction of the will of Jacob F. Bieder, deceased, and determination of the rights of the parties.

Testator died seized of several parcels of real estate worth '$50,000 and personalty of $30,000. By his will he devised and bequeathed all his residuary estate, after payment of debts, one-third to his son, one-third to his daughter and one-third to his executor in trust to pay the income to Mary Domagauer for her life, remainder to the son and daughter •aforesaid. The executor was given power of sale over all the real estate.

Some time after the execution of the will, testator married the said Mary Domagauer, and she survived him as his widow. She and the son and the daughter are the defendants. The question sought to be determined by complainant was whether the widow must elect as between dower rights and testamentary provisions. The widow answered and counter-claimed, also asking for determination of the rights of the parties.

On the day of the hearing the parties agreed upon a settlement of the matters in dispute and executed a written agreement under seal, and entitled in the cause. This was announced in open court by counsel for all the parties, and the agreement was read into the stenographer’s notes. No order or decree of any kind has been entered. The agreement reads as follows:

“This agreement of settlement made this tenth day of January, 1024, between William J. Boehm, executor of the first part, and Mary Domagauer Bieder of the second part and William J. Bieder and Emma Davis of the third part.
“The above cause shall be settled and the rights of the parties in and to the estate of the decedent are hereby settled as follows:
‘T. There shall be paid to Mary Domagauer Bieder the sum of twenty thousand ($20,000.00) dollars in full settlement of all her rights' and claims against the estate of the testator under the last will and testament and otherwise, excepting as hereinafter stated.
“2. In consideration of said sum said Mary Domagauer Bieder is to execute to said executor or the parties of the third part an assignment of her right, title and interest in and to the life estate devised to her by the will of said testator, and to also execute a deed of conveyance of all her right, title and interest and dower in and to the lands and premises of which said testator died seized.
“3. Said Mary Domagauer Bieder is to have the right to remain in possession of the homestead property to the first day of April, 1924, and if she elects so t>o* do is to execute a lease at the nominal rental of one dollar.
“4. Said Mary Domagauer Bieder shall have the option for a period of ten days to determine whether, as a part of the consideration of twenty thousand ($20,000.00) dollars above provided, she shall accept a conveyance of the homestead property at the agreed price of eleven thouesand ($11,000.00) dollars and of the household furniture at the agreed price of four hundred ($400.00) dollars.
“5. In the event of the said Mary Domagauer Bieder exercising said option in writing within said period of ten days, the balance shall be paid to her in cash as hereinafter provided.
“6. The said Mary Domagauer Eieder is to give credit upon this settlement for the sumí of seven hundred and sixty-four ($764.00) dollars heretofore collected by her upon insurance premium or for insurance benefits.
“7. In the event of Mary Domagauer Bieder electing not to take ■the homestead and household furniture, then there shall be paid to her the sum of ten thousand ($10,000.00) dollars within thirty days from this date, crediting thereon the insurance moneys already received by Mrs. Bieder, and the balance of ten thousand ($10,000.00) dollars upon her surrendering to the executor the possession of said homestead property and the household furniture, which shall he on or before April 1st, 1924. »
“S. * * * * *
“9. In the event of the said Mary Domagauer Bieder electing to have and receive the homestead and household furniture as a part of the consideration, then the balance of the amount of settlement shall be paid to her on or before April 1st, 1924.
“10. It is also understood and agreed as part of this settlement there shall be paid to the Honorable Abe J. David, solicitor of Mary Domagauer Bieder, a counsel fee of five hundred ($500.00) dollars chargeable against the estate.
“11. The parties further agree that, if necessary to carry out this settlement, a decree may be entered in the above-entitled cause without costs to either party as against the other.
“In Witness Whereof, The parties hereto have set their hands and seals the day and year first above written.
William J. Boehm, Seal.
William J. Bieder, “
Emma S. Davis, “
Mart D. Bieder, ' “ ”

Aii affidavit lias now been filed by the solicitor of the widow, setting forth the death of the widow intestate on March 5th, 1924, leaving her mother, Pauline Domagauer, and her three brothers, Albert, Paul and John, as her heirs-at-law and next of kin, and the appointment and qualification of Paul as her administrator, and further setting forth that on January 21st, 1924, the widow had notified the other parties of her election to take the homestead property under the settlement agreement, but that her illness and death had prevented the consummation of the settlement agreement.

On this affidavit application is made for an order “that the cause shall proceed at the suit of the complainant and against the surviving defendants, and amending the record and proceedings so that the said Paul Domagauer, administrator, * * * and Pauline Domagauer, Albert Domagauer, John Domagauer and Paul Domagauer shall be named in the cause as defendants in the place of the said Mary D. Eieder, deceased, and, further, that a final decree may be stated and entered in the cause in accordance with the terms of the settlement agreements,” which, as will be noted, contains a provision that, “if necessary to carry out this settlement, a decree may be entered” in this cause.

Passing for the moment the first phase of the application,, and assuming that the new parties have been substituted in the place of the widow, the second phase of the application,, as it appears from the briefs filed on the motion, is essentially for a decree for specific performance of the executoryprovisions of the settlement-agreement. That phase of the application must be denied, for such a decree, of course, cannot be made upon the record as it now exists; the pleadings-deal only with the question of construction of the will. Before such decree as the one now sought could be made, it will be necessary for supplemental answer and counter-claim to-be filed, 'setting up the circumstances occurring since the original pleadings, with opportunity for answering pleadings- and a hearing.

On the present record the administrator of the widow is entitled to the usual order to revive, substituting him in her place, for the cause of action has not necessarily abated by the death of the widow. True, her dower and her equitable life estate have terminated by her death, but (so- far as the present record shows, at least) the question would remain with regard to the interests up to the time of her death, and as to this the administrator might be entitled to collect amounts due and not received by the widow, or he might-be liable to repay, as a debt of the widow, overpayments received' by her.

The widow’s heirs-at-law obviously would have no- right-to- come in under this aspect of the matter.

So far as they are concerned, however, this application may be treated as one made under paragraph 3 of rule 13,. for leave to be made parties so- that they may file supplemental answer and counter-claim under rules 28 and 63.

Under rule 13 the right to- intervene as a party is made conditional upon the applicant’s having “an interest or title■ which the decree will affect.” This, naturally, does not mean that there must be a thorough and complete hearing and" final and absolute determination that he has such an interest or title, prior to admitting him as a party. Such a course would not be practicable-, and, indeed, in many cases (as in the present case) would require a preliminary determination of the very issues which the applicant seeks to- litigate. The rule does contemplate, however, that not every one shall be admitted as a party simply because he makes application. It contemplates that no such permission shall be given where- the applicant’s claims are clearly groundless; he must make a reasonable prima, facie showing of a claim that he- ought equitably to be permitted to have tried out.

Some scrutiny of the claim of the widow’s representatives is necessary therefore at the present time. Both sides have argued the case as on the merits, and the contention of the testator’s executor and children is that under well-settled principles specific 'performance cannot be decreed. If that clearly appear, then the application should be denied.

Examining the settlement agreement, and taking into consideration the determination- of its contingent provisions, resulting from the- exercise by the widow of her option, it will be seen that it is essentially one for the purchase and sale of real estate on both sides. Mary Eieder is to assign and convey all her equitable life interest in testator’s estate and the dower additionally claimed by her in testator’s realty, and is to receive in exchange a conveyance of the “homestead” property, and $7,836 in cash.

The contract is executory on both sides. It was a contract duly executed in the sense that it had become complete and binding, but it was executory as to the performance of its provisions. The widow had not received payment, nor had 'she assigned or conveyed her life estate or dower interest. All those things, as the contract says, were to be done -in the future.

The things which are, by the agreement, to be conveyed by the widow, are interests (one legal and one equitable) in real estate terminating at her death—life interests only. Performance on both sides was to take place April 1st. Prior to that date the widow died and her equitable life estate and dower interest were both thereby extinguished. There is nothing left which her heirs or legal representatives can convey in her place and stead.

It is contended therefore on behalf of testator's children that performance of the agreement on the part of the widow, or her representatives, has become impossible, because of the complete destruction of the subject-matter, and, in consequence, there can be no decree for specific performance against testator’s children and executor, performance having become impossible on the one side, performance cannot bo required of the other party.

Where there are mutual promises to- be performed in future, performance on one side is a prerequisite for performance on the other, if expressly or by implication so- provided in the contract. United and Globe Rubber Manufacturing Co. v. Conard, 80 N. J. Law 286 (at p. 293). The settlement agreement contains no such express provision, but it might be held to be implied. My recollection is that it has been held in this state that where the contract of sale does not make either conveyance or payment a conditional precedent to the other, both must be deemed to be intended to be concurrent acts. It is, of course, a well-established principle that a complainant seeking specific performance must show that he has performed, or has been and still is ready and willing to perform, on his part.

It is held, however, that destruction of the subject-matter of a contract excuses performance. This principle is an exception to the general principle as quoted in Middlesex Water Co. v. Knappman Whiting Co., 64. N. J. Law 240 (at p. 240), that “where there is a positive contract to do a thing not unlawful, the contractor must perform or pay damages-for not doing it, although, in consequence of unforeseen accidents, the performance of his contract has become unexpectedly burdensome or even impossible.” Citing Poll. Cont. 862.

Would not the application of this general rule of law in the present case require complainant to pay, particularly. in-view of the fact that the death at any time of the life tenant and dowress might reasonably have been anticipated by complainant, as at least a very possible occurrence? Moreover, have they not, in effect, by such death, received essentially what they sought, to wit, the removal of these outstanding-estates or interests as encumbrances on their absolute ownership ?

Going back to the exception to this general rule, it is stated in Middlesex Water Co. v. Knappman Whiting Co., supra, quoting from Taylor v. Caldwell, 3 Best & S. 826, “where, from the nature of the contract, it appears that the parties must, from the beginning, have known that it could not be fulfilled unless, when the time for the fulfillment of the contract arrived, some particular, specified thing continued to exist, so that when entering into the contract they must have ■contemplated such continued existence as the foundation of what was to be done,” performance is excused if the thing be destroyed. This has been quoted with approval by our supreme court in Perlee v. Jeffcott, 89 N. J. Law 34, and; Gouled v. Holwitz, 95 N. J. Law 277. Even under this exception, the question still recurs, as above mentioned, Has not the contract been substantially fulfilled, in so far as concerns what complainants were to receive?

As to personal property, this principle is stated in 35 Cyc. 246, where the sale is of specified goods which, without the seller’s fault, are lost or destroyed before the day of delivers-, the seller is excused from delivery and the buyer from obligation to pa3r. It is, at least, interesting in this connection to note that our Sales* act (4 Comp. Stat. p. 4645) provides in section 22 that, unless otherwise agreed, the goods remain at seller’s risk until the property therein has been transferred to the bryer; and in section 18, that the property in the goods is transferred to the buyer at such time as the parties intend it to be transferred.

Two cases cited by complainants seem by analogy pertinent to the case at bar, the English case of Taylor v. Caldwell, 3 Best & S. 826, and Huguenin v. Courtenay, 21 S. C. 403; 53 Am. Rep. 688. In the former defendant contracted to lease a imrsic hall to plaintiff for a series of concerts. Before the commencement of the term the hall burned down accidentally. Defendant was held excused from performance and under no liability to plaintiff, on the exception rule above mentioned. In the Huguenin Case plaintiff contracted to sell defendant a leasehold interest, to commence in future, in a seashore lot, which was partly washed away by a storm prior to the date for consummation. It was held that the property was at the risk of plaintiff, and specific performance was denied to> him.

On the other hand, Fry Spec. Perf. (6th ed.) 431, saj^s, in effect, that it is now clearly recognized and well established in England, that when the contract of sale has been completely made, “the thing sold is at the risk of the purchaser, who must bear all subsequent losses, and is entitled to all subsequent gains; subsequent events, therefore, can neither determine the contract nor give either party a right to resist its performance,” citing numerous cases.

Moreover, it'has been decided by this court, in Cropper v. Brown, 76 N. J. Eq. 406, that the destruction of buildings between the making of contract for conveyance and the date set for consummation, will not excuse the purchaser from performing the contract; that the equitable title is transferred to the purchaser on the making of the contract, and as the equitable owner the purchaser takes the benefit or stands the loss that may accrue thereafter.

The rule thus laid down is the logical, and, it would seem, the necessary consequence of the principle of equitable ownership by a purchaser, and this latter principle is firmly established in this state as to sales of real estate. See Haughwout v. Murphy, 22 N. J. Eq. 531 (at pp. 546, 547), and among the more recent cases, McVoy v. Baumann, 93 N. J. Eq. 638 (at p. 642).

I am unable to see any logical basis for any distinction in principle in this behalf as between contracts for the sale of lands in fee-simple and contracts for the sale of any other interests in land, or, indeed, contracts for the sale of personal property. The jurisdiction of equity to decree specific performance of a “contract for the purchase or sale of personal property is too well settled to be doubted” (Law v. Smith, 68 N. J. Eq. 81 (at p. 83), and cases cited, and while that jurisdiction will not be exercised in every case by any means, when it is exercised, it seems to me that the same principles would 'apply as in contracts for lands in fee-simple.

Moreover, it was apparently held in Anson v. Towgood, 1 Jac & W. 637, and was expressly held in Vesey v. Elwood, 3 Dru. & War. 74, that a purchaser of a life interest is bound to make payment notwithstanding the life is terminated by death prior to the date for consummation. These cases are cited by Vice-Chancellor Garrison in Cropper v. Brown, supra.

. Again, in Mulford v. Eiers, 18 N. J. Eq. 18, it is held, in effect, that in partition, upon a sale of a widow’s dower for a sum in gross, she becomes immediately vested with the right to the gross sum, which passes to her representatives on her death. Chancellor Green there says (page 16) : “If the law had left to the widow her election, whether or not to consent to a sale of her dower upon receiving a sum in gross in lieu of her estate, and she had given such consent, undoubtedly the widow would have had a vested right to such equivalent upon the sale being made.” By “sale being made,” he means,, of course, “contract of sale,” not the actual consummation or conveyance. For he goes on to say, “if she had voluntarily contracted for the sale of her estate for a fixed sum, her children would.have been entitled to the benefit of her contracts.” In McLaughlin v. McLaughlin, 22 N. J. Eq. 505 (at p. 512), Mulford v. Eiers was approved and followed by the court of errors and appeals, although in that case the widow’s death did not take place until after the actual conveyance.

The real basic question in all cases of executory contracts, is, of course, to whom shall interim gain or loss attach. If that question has not been specifically provided for in the contract, it must rest on the reasonable intendment of the parties. Where the contract is of sale, it would seem clear that the reasonable intendment of the parties, in the absence of definite expression otherwise, is that there is a transfer of equitable ownership at once. The sale has been made; it is only the details of physical transfer which remain to be carried out. If the gain or loss in the inbeñm- be merely small, this more clearly appears. On a sale of a corporate bond of $1,000 market value on the day of sale, it would not occur to either party that an increase or a decrease of a dollar or two in value, prior to the delivery date, would be ground for rescinding the sale. The principle is, of course, the same whether the change in value be small or large. Again, the purchaser of the seashore lot who sought to avoid the contract because the sea had swept half of rt away, would have been just as strenuous in claiming performance if the action of the sea had doubled the size of the lot. But the principle must, of course, be the same whether the change in value be increase or decrease.

It is true that there does exist a technical distinction between a loss which is a decrease in market value without de: struction of the whole or a part of the physical structure of the thing sold, and a loss which results from such a destruction. But that distinction is purely technical. The loss is the thing of moment, not the means by which it occurs. Suppose a man makes two contracts of purchase and sale on the same day, one as vendee of shares of corporate stock with a then market value of $10,000, and the other as vendor of a race horse worth $10,000, both contracts to be consunp mated two weeks thereafter. In the meantime the corporation becomes practically insolvent, and the stock is worth only $10, and the horse is accidentally killed by lightning. Is he to stand both losses? Would such a result commend itself to any mind from the standpoint of reason and justice, on the basis of the technicalit}'; that in the one case the thing sold had not been physically destroyed and in the other case it had? ,

It seems to me that the applying parties may well be entitled to specific performance in the present. case;, certainly they are entitled to the granting of their application to be made parties, and to have leave to file supplemental answer and counter-claim. The administrator is interested in regard to the money part of the consideration, and the heirs-at-law in regard to the homestead property to be conveyed.