author: Embey, Y. 0.

text:
    Commercial Assurance Company (Limited) of London v. New Jersey Rubber Company.
    [Filed May 18th, 1901.]
    1. Finding in an action on a fire policy that it was intended to be issued and delivered in its present form, when the parol condition that concurrent insurance be obtained was complied with, precludes a contention, in a suit to enjoin the judgment, that the agreement was that the condition be written in the policy.
    2. Facts occurring and being within complainant’s knowledge before the filing of the original bill, should be introduced by application to amend the bill, and, being introduced by supplemental bill, render it demurrable so far as based thereon.
    3. In equity, as well as at law, cancellation by the insurer, of its own accord, of a fire policy, and retention of the pro rata proportion of the premium as on a valid policy, as allowed by the policy, is an affirmance of the validity of the policy.
    4. No different effect than an affirmance of the validity of a fire policy is to be given to cancellation thereof, after a fire, by the insurer, of its own accord, and retention of the pro rata proportion of the premium, as on a valid policy, by the declaration of the insurer that the cancellation was made expressly subject to the final settlement of the claim for loss, and that in retaining the earned premium and returning the balance it did not intend to recognize the policy as binding for any greater proportion of the loss than its pro rata share, and that it protested it was not liable for any greater amount, and was not to be understood as assuming any greater liability than the pro rata amount offered by it, and that this was understood and assented to by insured.
    On demurrer to supplemental bill.

      Mr. Richard S. Euhl and Mr. John Rcllslab, for the demurrant.

      Mr. Richard V. Lindabury, for the complainant.
   Embey, Y. 0.

. The original bill was filed to reform an insurance policy issued by complainant to defendant, and to enjoin an action at law brought to recover a loss under the policy. The policy was issued for $25,000, and the amount covered by the policy was divided among several buildings of defendant and their contents, one of the buildings being a frame storehouse, which, with its content's, was insured for $5,000. This storehouse was destroyed by fire on October 21st, 1897, during the term of the policy, which ran from August 1st, 1897, to August 1st, 1898, and a total loss on this building resulted. The policy, as written, contained a clause that “other concurrent insurance was permitted without notice until requested,” and contained no other clause as to concurrent insurance. Complainant’s bill alleged that the real agreement between the parties as to the insurance was that certain other insurance, to the additional amount of $84,500, should be taken out by the defendant upon all the property to be insured by complainant, and that complainant’s insurance was to be exactly concurrent and proportionate with the other insurance to be effected, but that the insertion in the policy of this part of the agreement was omitted, on complainant’s part, by its mistake in supposing and believing that the defendant was, in fact, taking out other policies of insurance concurrently with the complainant’s policy, in such form as to be, in effect and in operation of law, concurrent and proportionate on all the property insured by complainant. As to defendant’s intention in reference to the form of the policy, it is alleged that it either had the same mistaken belief, or else that it fraudulently concealed the fact that concurrent and proportionate policies on all the property insured were not so taken out. These policies in other companies, although taken out by the defendant,' were not, in fact, concurrent or proportionate on all the property covered by complainant’s policy, but, on the contrary, did not cover at all the frame storehouse and its contents, which were specially hazardous risks. After the loss, the complainant, as its bill further alleged, offered to pay its proportionate share of the $5,000, as if based on a concurrent and proportionate insurance with the other policies, but defendant refused to accept this amount, and brought suit to recover the entire amount of the loss on the storehouse and its contents. Complainant’s bill offered to pay such proportionate amount and sought to enjoin the suit on the policy and from recovering in said suit more than the proportionate share, to reform the policy to conform to the agreement under which it was issued and for general relief. Defendant’s answer to the bill denied the alleged agreement for concurrent and proportionate insurance, or the making of any other agreement for insurance than the one appearing by the policy itself. Upon an application for preliminary injunction, heard upon bill, answer and affidavits, it was ordered that the application stand over until after the trial of the action at law. This order was made for the reason that the complainant, on the hearing, was not prepared to admit legal liability on the policy, and (as appears in the order) that the complainant claimed to have legal defences to the action at law, outside of the facts presented as the basis for equitable relief, and also, upon the ground that the facts presented as a basis for equitable relief might also be held sufficient defences at law. The action at law then proceeded, and the complainant (as the defendant therein) set up as defences (1) concealment of material facts, (2) misrepresentation of material facts, (3) that at the time of the delivery of the policy the rubber company falsely represented to the insurance company that concurrent and proportionate policies were being taken out, and (4) that the delivery of the policy to the rubber company was upon the condition that it was not to take effect unless and until the rubber company procured other concurrent and proportionate insurance to the amount of $81,500 in certain companies named. In the action at-law, after hearing and considering the evidence offered by the defendant in the action to sustain these defences, it was finally determined, as appears by the opinion of the court of errors and appeals, set out in the supplemental bill, that these defences were sustained, and that the policy of insurance was void at the time of its issue—first, upon the ground that the insured represented to the insurance company that it was procuring other insurance to the amount of $84,500, concurrent and proportionate with the insurance company’s insurance, which representation was material and was relied on, and was false in fact, and second, upon the further ground that the policy was delivered and accepted upon the understanding and condition that it was not to take effect or become binding upon the insurance company unless and until the rubber company purchased other insurance -upon the same property eoncurent and proportionate to that effected by the policy to the amount of $84,500, and that the rubber company failed and neglected to perform this condition. This decision at law upon the facts settles, as between the parties, conclusively and for all purposes, including this suit, the agreement, conditions and terms upon which the policy was issued and deliverecl in its present form. And thus settled by the trial at law, this agreement was that the policy was issued in its present form upon the representation and condition that other concurrent and proportionate insurance was being taken out, and that the policy was not to take effect unless and until such insurance was taken out. This finding, that the policy was intended by the parties to be issued and delivered as a binding policy in its present form, when the condition was complied with, necessarily precludes, as it seems to me, either party from alleging or proving thereafter, in this or any other suit, that there was any mistake upon the part of either party in relation to the form of the policy, or that the real agreement was that the agreement as to concurrent and proportionate insurance should be written into the policy. Complainant’s original bill alleges the delivery of the policy im'der its mistake, not as to the form of the policy, or its belief that this clause as to concurrent and proportionate insurance had been inserted, but expressly alleges that, on its part, this clause was omitted by a mistake of the complainant in supposing and believing that the said mutual companies’ policies were being issued in such form as to be, in effect, concurrent and proportionate with the said contract of insurance being made between complainant and defendant. The relief, under the orignal bill, could not, therefore, have been a reformation of the policy for the purpose of inserting the concurrent clause, and as to relief against the contract, based merely on the mistake which was set out in the bill, as the basis of jurisdiction, the decision of the courts of law shows that interposition of a court of equity was neither necessary nor justifiable for relief against the original contract, but that relief against the contract, to an extent as great or greater than a court of equity would have granted, was obtainable in a court of law, which does not impose conditions of relief. So far as relates to relief upon the original bill, which was based on mistake, the case has been conclusively disposed of by the judgment of the court of law, finding the mistake to have existed and declaring the contract of insurance, by reason of the mistake, in connection with other facts, void at the time of its issue. The further interposition of this court to restrain the judgment finally entered in favor of the rubber company in the action at law must, therefore, be based upon the additional facts relating to the contract of insurance, which appear in the supplemental bill. These facts, although they existed at the time of filing the original bill, were first disclosed in the action at law, and were there made the basis for a decision that the policy was binding on the complainant, notwithstanding it had been originally void. The policy, as issued, contained the following provision as to cancellation, viz.:

“This .policy shall be cancelled at any time at the request of the insured, or by the company by giving five days’ notice of such cancellation. If this policy shall be cancelled as hereinbefore provided, or become void or cease, the premium having been actually paid, the unearned portion shall be returned on surrender of this policy or last renewal, this company retaining the customary short rate. Except that when this policy is cancelled by this company by giving notice, it shall retain only the pro rata premium."

After the loss by fire in October, 1897, the complainant paid its proportionate share of the loss covered by its policy, to property other than that in the frame warehouse and its contents; and on November 25th, 1897, canceled its policy, retaining the premium theretofore received from the defendant as upon a valid policy, so far as the same was earned up to that date, and returning the pro rata unearned premium on the full amount—$25,000—insured by the policy. In reference to this cancellation of the policy and its effect upon the rights of the company, the court of lav1, upon the evidence before it in reference to the cancellation, decided as follows: “Third. That by cancelling the said policy of insurance and paying back the unearned premium, biit retaining so much of the premium as would have been earned by valid insurance from the date of the policy until the time of cancellation, the complainant had affirmed the validity of the said policy and could not in said action successfully deny the same.” For this reason the judgment for the plaintiff for the full amount of the loss sued for was affirmed. Complainant’s supplemental bill for the first time discloses these facts as to the cancellation of the policy which occurred before filing the original bill in March, 1898, and should regularly have been then disclosed. The facts having occurred, and being well within complainant’s knowledge, before the filing of the original bill, are not strictly matters upon which a supplemental bill, or bill in the nature thereof, can be based. As the basis for relief they could only be introduced regularly by an application to amend the bill after notice, and if made the subject of a supplemental bill, render it subject to a demurrer, so far as the relief sought by the supplemental bill is based thereon. Barriclo v. Trenton, &c., Insurance Co., 2 Beas. 154, 158. But without disposing of the case on objections to the formal method of bringing the facts to the attention of the court, the final question presented for decision on the substantial merits of the supplemental bill, is this, viz., can a court of equity, after the trial at law upon the question of the waiver of the invalidity of the policy by the acts of the complainant, retry this question, either as to the facts involved, or for the purpose of giving a different effect on the policy or contract of the parties, to the acts of waiver, from the effect given by the court of law? Or, in other words, can a court of equity give any other or different effect from that given in a court of law, to the cancellation of the policy by the company and its retention of the earned premium, as on a valid policy? The effect to be given at law to such a cancellation was stated by the court of errors and appeals in the opinion filed .in the cause. New Jersey Rubber Co. v. Commercial Union Assurance Co., 35 Vr. 580 (1900). “Clearly the defendant [the insurance company] could not assert a right to the premium for valid insurance, and at the same time insist that the insurance had never been effected. By claiming and maintaining such a right [of retention] with full knowledge of all material circumstances, it unequivocally affirmed the validity of the insurance for the’ period covered by the premium, and definitely waived every objection on which its validity could be denied.” A court of equity cannot, in my judgment, give any other or different effect to this cancellation and retention of the premium, proceeding, as it does, solely under the rights reserved by the policy to the company against the insured. By such cancellation of its own accord, a right derived solely from the policy, which the insured was bound to accept, if it also stood by the policy, the complainant has, in my judgment, as well in equity as at law, affirmed the validity of the policy in its form at the time of cancellation, and cannot escape like consequences for this action by any appeal to different courts. No authority has been referred to supporting the contention that on the determination of questions of this character (the effect of a waiver of the invalidity of a policy) a court of equity proceeds upon principles different from that of courts of law, and I know of no difference in the principles to be applied in the two courts for the decision of such question. The whole subject of the existence and effect of such waivers is one which courts, both of law and equity, decide upon principles which may be characterized, perhaps, as equitable principles. The decision of the court of errors and appeals in this action is, therefore, in my judgment, conclusive between the parties, not only as to the existence of the waiver, but as to the effect to be given to it, and no other or different effect can be given to the waiver by any rehearing of the question in this court. And the decision of the court of errors and appeals is also conclusive upon this court, if it be considered merely as a rule declaring the effect to be given to a waiver of this character, and this rule, irrespective of the question of the parties to the suit, would, in my judgment, necessarily be followed by this court, even if the question between the present parties, as to the effect of the waiver, had been raised upon a bill for relief in equity, presented after the decision of the court of errors and appeals upon this question, and before any trial at law between the parties. There are allegations in the supplemental bill that the cancellation was made “expressly subject to the final settlement of the claim for loss,” and that in retaining the earned premium and returning the unearned premium, complainant did not intend to recognize the policy as a binding obligation for any greater sum or proportion of the loss than its pro rata share, and that it protested that it was not liable for any greater amount, and was not to be understood by any of its acts or offers as assuming any greater liability than the amount so offered; and that this was well understood by the defendant and assented to by it. It is urged that these allegations, by the company itself, as to the intention and effect of the exercise of its rights which it had under the policy (if it chose to insist on the existing policy rights) controlled the effect of the exercise of these reserved rights. This doctrine cannot be admitted. Having exercised its rights to cancellation, as under the policy, in its then existing form, it was not possible for the complainant, by its own declarations, to control or limit the effect of the cancellation and retention. There is also a general allegation in the bill, at the end of these clauses as to the payment under protest, that “all of which was well understood by the defendant and was then and there assented to by it;” and it is contended that this allegation, taken in connection with the preceding, make out a ground of equitable relief against the judgment at law. But this general allegation, either taken alone or in connection with the preceding allegations, does not disclose any such equitable case against the defendant as deprives it of the right to insist on the proper legal and equitable effect to be given to a cancellation of the policy, and retention of a premium which was not made at its request, suggestion or inducement, and which it was impossible for it to prevent. For does it show any grounds estopping defendant from insisting upon the conclusiveness of the subsequent judgment of the court of law, as to the effect to be given in this court to the cancellation and retention.

I reach the conclusion, therefore, that on the facts disclosed by the supplemental bill, no equitable case is made out, and the demurrer must be sustained.


source: Caselaw Access Project

author: Stevens, Y. C.

license: Public Domain

text:
    In the matter of the petition of Annie Cunningham for a writ of habeas corpus.

    [Filed February 23d, 1901.]
    A mother applied lor a writ of habeas corpus to recover the custody of her daughter, sixteen years old, from the House of the Good Shepherd, to which she had agreed to send her for a year. The year having expired, and the daughter having expressed a desire to remain where she was till she had got more strength to resist temptation, and the mother only proposing to put her out to service in nearly the same neighborhood in which she fell into immoral ways—Held, that, whether the proceeding were regarded as a strict habeas - corpus proceeding or a chancery one, in which the welfare of the girl was the controlling issue, all the court would do would be to free her from restraint, if any existed.

      Mr. Henry II. Snecleher, for tlie petitioner.

      Mr. William J. Kearns, for the respondent.
   Stevens, Y. C.

The material facts are these: The subject of the writ is Henrietta Cunningham, a girl who was sixteen years old last November. Her father, nominally-a Eoman Catholic, does not live with or support his wife, though he visits her occasionally. Her mother, a Protestant, supports herself and three young children by washing. Henrietta, as her mother admits, got beyond her control when eleven years old. At that age she left school, against her mother’s will, and was then employed in a kindergarten and afterwards at general housework. She fell into immoral ways, and was twice arrested. On the occasion of the second arrest, on November 27th, 1899, she was brought before Justice Bray, of Orange, who told the petitioner that unless she could find a suitable place where Henrietta could be looked after, he would commit her to jail, with a recommendation that she bo sent to the reform school. The petitioner, not being able to find any such place over night, the justice, on the day following, told her that unless she .was willing to send her daughter to the House of the Good Shepherd, a Eoman Catholic institution, he would send Henrietta to jail. Her mother agreed that she should go to the House of the Good Shepherd for a year. While there she was baptized as a Eoman Catholic and has adopted that faith. She has been taught to work on a machine and to make shirts. At the expiration of the year she remained in the institution and is there still. She was called as a witness, and in answer to the question, “Why is it you don’t wish to go back to your mother ?” she said:

“Because my conscience won’t allow me. I don’t want to fall again. £ want to stay in the House of the Good Shepherd one year more at least and then I shall be strong enough for me to get along, and if I go out I shall fall again. I understand now that my life is wrong. I have learned that since I have been in the House of the Good Shepherd.”

Her mother testifies that she desires to take her out and get her domestic employment in the same town in which she fell.

It seems to me perfectly obvious that all that the court ought to do in the case is to free her from restraint, if any restraint exists. And precisely the same result will be reached whether the proceeding be regarded as a strict habeas corpus proceeding/ or as one appealing to' the chancellor as the representative of the state, the ultimate guardian of all infants.

If the case be regarded as a habeas corpus proceeding merely, then the rule stated in State v. Stigall, 2 Zab. 286, applies: “When a child is brought up on habeas corpus, if of sufficient ago and discretion, the court will only ascertain whether the child is under restraint, and if so, will merely make an order setting him at liberty to go where he chooses.” By a long line of cases it has been settled in England that the age of discretion in the case of a girl is sixteen years. In re Agar Ellis, 24 Ch. Div. 317, 326. I see no reason why the age of sixteen should not, in the absence of satisfactory evidence to the contrary, be regarded as the age of discretion here, but “the extent of the mental development” will be the controlling factor (Richards v. Collins, 18 Stew. Eq. 287), and cases will doubtless arise in which the court will transfer to parents, having the" clear legal title, the custody of girls over that age, and refuse it in the case of girls under that age. State v. Baird, 4 C. E. Gr. 481, 482. And there is a broad distinction in the adjudged cases between those in which the parent has both the right to the custody and the custody itself (as in the Agar ETlis Case), and some one is seeking to deprive him of that right, and those in which the parent, having the right, is seeking to recover the possession from others. It is to the latter class 'of cases that the rule above quoted from State v. Stigall is applicable. The case in hand comes under this rule. The petitioner is seeking to recover the custody of a girl who possesses both the requisite age and the requisite intelligence to make an election. In State v. Stigall the contest was between the father and the mother, but the same rule applies where it is between the parent and a stranger. Rex v. Smith, 2 Str. 982; In re Shanahan, 20 L. T. 183; Queen v. Gyngall, 2 Q. B. Div. 232 (1898); In re Lyons, referred to in 10 Ch. Div. 65. In Richards v. Collins, supra, the controversy was between the parents and a maternal aunt, but the precise point here presented did not arise, as the girl was only twelve years old, and the case was decided against the parents on equitable grounds merely.

The authorities cited seem to míe to be a complete answer to the argument principally urged by petitioner’s counsel, namely, that the petitioner has a legal title to the possession of her child, and that she may enforce that title by compulsory process, whether, in point of fact, the child be or be not under illegal restraint.

If the proceeding be viewed as a chancery one, in which the-welfare of the girl is the controlling consideration, then it appears to be plain that she should be allowed to remain where she is. Her mother’s circumstances are such that Henrietta must support herself. Her mother proposes to do what is probably the only thing she can do—put Henrietta out to service. But she fell before, while she was at service, in a perfectly respectable family, and I cannot think it will conduce to her permanent reformation to expose her, at her age, to the same temptations in very much the same neighborhood. Ho doubt the family willing to receive her will do what it can to guard her, but she will still be near her former companions, and absolute supervision of all her movements out-of-doors is impracticable. I will, if counsel desire, examine her further as to her freedom from restraint, but her wishes have been expressed so clearly and in so many ways that it seems unnecessary.

I have decided this case on the assumption that the father’s right, by reason of his alleged abandonment of his family, is to be subordinated to that of the mother, and that his wish that his daughter should remain where she is should not be taken into account. I do not wish to be understood as expressing any opinion on this subject.


text:
    William M. Donald et al. v. American Smelting and Refining Company et al.
    [Argued March 4th and 5th, 1901.
    Decided March 11th, 1901.
    Riled March 13th, 1901.]
    Revision of 1896 (P. L. of 1896 p. 893 § 1/9) provides that any corporation formed under the act may purchase property and, issue stock to the amount of the value of the property, and, in the absence of actual fraud, the judgment of the directors as to the value of the property purchased shall be conclusive. A corporation capitalized for $65,000,000 issued stock to the amount of $54,800,000 which was fully paid. It had earned eight per cent, on the par value of the stock, and proposed to increase its capital to $100,000,000 and to issue $45,200,000 of stock for property of a competing company, the owners of which were to put in $12,000,000' in cash. There was evidence that the property was not worth over $10,000,000, but when the arrangement became known, defendants’ common stock rose from forty-one to sixty-three, and the preferred from ninety-one to ninety-nine and one-half. The business of the company sought to be amalgamated was prosperous, and the company possessed a world-wide and valuable reputation.—Held, that the consolidation would not be enjoined at the suit of a stockholder, since the evidence did not show that there was conscious overvaluation of the property by the directors of the smelting' company.
    On bill.

      Mr. Richard V. Lindabury, and Mr. Lauierbach (of the New" York bar), for the complainants.

      Mr. William Ii. Corbin, Mr. Robert E. McCarter, Mr. Thatcher and Mr. Unlermeyer (of the New York bar), for the defendants.
   Stevens, Y. C.

This is an application for a preliminary injunction to restrain the American Smelting and Refining Company from increasing-its capital stock from $65,000,000 to $100,000,000, and to restrain the directors of the company from purchasing the plants of M. Guggenheim’s Sons, for its capital stock at par, to the amount of $45,200,000.

The injunction is asked for on two grounds. The first ground is, that as part of the agreement for such purchase it was arranged that of the stock to be issued to M. Guggenheim’s Sons, over five million dollars of common and five million dollars of preferred were to be turned back presently to the different members of the board of directors, or to a majority of them, at the price of eighty cents on the dollar for the preferred and fifty cents on the dollar for the common stock.

The second ground is that the smelting and refining plants of M. Guggenheim’s Sons, including their mining leases and contracts, are not worth more than ten millions of dollars; and that conceding that by the terms of the agreement, they will, in addition, be obliged to pay twelve millions in cash, the total ($22,000,000) is not a full equivalent for the $45,200,000 of stock to be issued to them; this equivalent .being required by section 49 of the Corporation act, which authorizes the purchase of mines, manufactories, &c., and the issuing of stock “to the amount of the value thereof, in payment therefor.”

It is admitted that the first ground of complaint has not been established; and I shall, therefore, confine myself to a discussion of the second. Before doing so, I will state what I understand to bp the legal rule. So many changes have been made in the statutes applicable, that it may be well briefly to mention them. The first act is that of 1846. It authorizes the establishment of manufacturing companies, and provides in section 27 (P. L. of 1846 p. 69) that

“no note or obligation given by any stockholder whether secured by any pledge or otherwise shall be considered as payment of any part of the capital stock.”

The same provision is contained in the act of 1849. P. L. of 1849 p. 306 § 26. It continued unchanged until the revision of 1875, when the act quoted was, greatly changed, transferred to the Corporation act, in which it appears as section 54. Boo. Stat. p. 186. It there reads:

“Nothing but money shall be considered as payment of any part of the capital stock * * * except as hereinafter provided, for the-purchase of property.”

Then follows a new section (section 55) as follows:

“The directors of any company incorporated under this act may purchase mines, manufactories or other property necessary for their business and issue stoelc to the amount of the value thereof, in payment therefor, and the stock so issued shall be declared and taken to be full paid stock; neither shall the holder thereof be liable for any further payments under any of the provisions of this act, and said stock shall have legibly stamped upon the face thereof the words ‘issued for property purchased.’ ”

It was these provisions that were in force when Wetherbee v. Baker, 8 Stew. Eq. 502, was.before the court of errors, although the court in that case was not called upon to construe them, but the somewhat analogous, though less explicit provision, contained in section 3 of the Land Improvement act (Rev. Stat. p. 568), which provided that the payment of capital stock

“shall be made either in money or in land * * * the land to be appraised by the board of directors and taken at such value by the said company, on such terms as may be agreed upon.”

Notwithstanding that the price appeared to be left entirely to the judgment of the directors, it was held in that case that the rule applicable was

“that payment of stock subscriptions is good as against creditors only where payment has been made in money or what may fairly be considered as money’s worth.”

If this was the rule in cases arising under the Land act, a fortiori, would it apply to cases arising under the Corporation act of 1875, for this latter act, in plain terms, required a full equivalent in property for the stock to be issued for it; and such was the construction put upon it by Vice-Chancellor Green in Edgerton v. Electric Co., 5 Dick. Ch. Rep. 354, 361.

In 1889 the act of 1875 (P. L. of 1889 p. 414) was broadened by adding to the things that might be purchased, “the stock of any other company or companies owning, mining, manufacturing or producing materials.”

Then came the revision of 1896, section 4-9 of which reads as follows:

“Any corporation formed under this act may purchase mines, manufactories or other property necessary for its business, or the stock of any company or companies owning, mining, manufacturing or producing materials, or other property necessary for its business, and issue stock to the amount of the value thereof in payment therefor, and the stock so issued shall be full paid stock and not liable to any further call, neither shall the holder thereof be liable for any further payment under any of the provisions of this act; and in the absence of actual fraud in the transaction, the judgment of the directors as to the value of the property purchased shall be conclusive.”

This is the section under which the present controversy arises. It will be seen that it differs from the act of 1875 in omitting, the requirement that the stock be stamped “issued for property purchased,” and in providing that in the absence of actual fraud, the judgment of the directors as to value should be conclusive.

It is somewhat singular that our courts have not been called upon to apply these various statutory provisions more frequently. In Hew York, however, the decisions upon a provision of a statute almost identical with that already mentioned in the act of 1875, are numerous and will throw much light upon what is to be deemed “actual fraud.”

Among the cases referred to in Wetherbee v. Baker, 8 Stew. Eq. 513, is Boynton v. Hatch, 47 N. Y. 225. That was a creditor’s suit brought against a stockholder to make him liable for two judgments recovered against the Empire Moulding Company, on the ground that the stock was not paid in.f Evidence was given as to the value of the property, in payment for which the stock had been issued. The referee excluded it as immaterial. On the appeal, the question was whether he had rightly excluded it. Mr. Justice Grover held that the price agreed upon was only prima facie evidence of the value of the property and that the real question was, what was its actual value? Mr. Justice Allen, on the other hand, was of opinion that the real question was whether the act of the directors in purchasing the property and issuing the stock for it was a fraud upon the law—that is, whether it was a mere evasion of the statute which authorized stock to be issued only to the amount of the value of the property purchased. Two of the judges concurred with Judge Grover and two with Judge Allen. They all agreed, however, that the referee was wrong in excluding evidence of value, as, in any view, actual value was a material element in the proof.

Judge Allen’s opinion subsequently prevailed. In Douglas v. Ireland, 73 N. Y. 102, after saying that the transaction may be impeached for fraud, but not for error of judgment in the valuation, the same judge says, “all that is necessary to establish the legal fraud [i. e., the fraud upon the law] * * * is to prove two facts—first, that the stock issued exceeded in amount the value of the property, in exchange for which it was issued; second, that the trustees deliberately and with knowledge of the real value of the property overvalued it and paid in stock for it, an amount which they knew was in excess of its actual value;” and then he goes on to say that the value must be determined upon the evidence, having respect to the circumstances of the case and the nature of the property, and that “the scienter and guilty action of the trustees may be either proved directly or inferred from circumstances.” In that case it was held that the circumstances were such as to warrant the inference of fraud; and fraud was also deemed to have been proved in Boynton v. Andrews, 63 N. Y. 93, and in N. T. W. Co. v. Gilfillan, 124 N. Y. 302, while in Lake Superior Iron Co. v. Drexel, 90 N. Y. 88, the court allowed a verdict for the defendant to stand, although on the question of fact it would itself, apparently, have come to a different conclusion, and in Gamble v. Q. C. W. Co., 123 N. Y. 93, there was a reversal because the trial judge had excluded from consideration some of those elements of value in the works purchased, which tended to make the price reasonable.

In Bickley v. Schlag, 1 Dick. Ch. Rep. 534, the finding of the trial court was “that the amount of stock issued by the company was of the value of $75,000, but that only $64,000 worth was paid for it, so that $15,500 worth of stock remained unpaid, for; for that the stockholders are still liable.” This finding was evidently based upon the view of the law entertained by Judge Grover, to which I have before adverted. It was, as I understand, repudiated by the court of errors in the following language: “In view of the proofs in the case, it was not and could not be disputed that the stock in question, as between these stockholders and the corporation, had been paid for in full; for they had transferred to the company, in satisfaction for it, certain steamboats and other property, each share .so purchased being marked with the words ‘issued for property purchased.’ Consequently so long as this contract of sale subsisted, an indisputable title to the stock existed in the stockholders, and it ivas also thereby conclusively established that they were in nowise indebted to the company by reason of their purchase. The inquiry, therefore, in the court below should 'have been, whether the agreement in question was fraudulent or not; for if the transaction was an honest one, the difference in value between the property constituting the consideration of the sale and the stock had no legal significance.”

Now it is quite apparent that the intention of the revisers of the act of 1896 was to put in statutory form the result of this prior course of adjudication. The fraud referred to in the forty-ninth section is fraud upon the law; and in the words of Mr. Justice Allen, in Douglas v. Ireland, supra, no other fraudulent intent need be proved “than that which is evidenced by the act of knowingly issuing stock for property in excess of its value.” It must be remembered, however, that a wide discretion in the matter of valuation, as in other matters, is. confided to directors. As long as “they act in good faith, with honest motives, for honest ends,” the exercise of their discretion will not be interfered with. “Courts of equity,” says Mr. Thompson in his work on Corporations § 1518,

“cannot be called upon to control the discretion of the managing bodies • of corporations. Otherwise they would be choked with applications of recalcitrant stockholders. The action of a board of directors may be ill-advised or apparently unprofitable, but this furnishes no ground for in-voking the restraining powers of "the court.”

Given bona fides and the court will not put Us opinion as to values against theirs. The test will be conscious overvaluation and not ill-advised action.

In nearly all the cases above cited, it was the creditors who brought the suit, after the purchase had been consummated. In the case in hand, it is stockholders who are seeking to enjoin the purchase in limine. It seems to me clear that in the situation here presented, these stockholders have a right to ask the court to interfere for their protection. Presumably they have paid either money or money’s worth for their stock, and if the contemplated issue is for property at an overvaluation, the inevitable result will be to lessen their proportionate shares or interests in the entire property. Besides they have a right to insist that their property, shall be managed in conformity with the law.

I now come to the facts. The smelting company was incorporated under the laws of this state in April, 1899. Its authorized capital stock was $65,000,000, of which $54,800,000 has been issued. It is proposed to increase this stock to $100,000,000 and to issue to M. Guggenheim’s Sons $45,200,000, one-half common and one-half preferred. It is not denied that on the ! basis of relative values, the combination of the two interests, in this manner, is a fair one. The fact is that when, in Decemher last, it became known that the arrangement had been made, the preferred stock of the smelting company, already issued, rose from ninety-one to ninety-nine and one-half, and the common from forty-one to sixty-three. If, then, the smelting company’s property is worth the par value of iis outstanding stock ($54,800,000), the property of the Guggenheims would appear to be worth the amount at par of the stock to be issued to them.

It is contended, however, that the smelting company’s property is not worth $54,800,000. It is no doubt true that some companies have issued stock for property purchased far in excess of its actual value, but it is also true that others have, in this regard, strictly conformed to the law. Of course, in determining the present case I cannot resort to conjecture. The pleadings and ex parle affidavits must be my sole guide.

The bill alleges that all the stock that has been issued by the smelting company is fully paid. What am I to understand by this ? The foregoing discussion shows that what I am to understand is this—that for all the stock issued, money’s worth—that is, a full equivalent, has been received. Hence I must take it to be a fact (for the bill alleges it and the answer admits it) that in April, 1899, this company acquired property then worth $54,800,000. But the bill further alleges, in paragraph 7, that on January 1st, 1901, the company had no working capitaj, and that its capital had become impaired—to what extent is not stated. The bill, in this particular, is verified only on belief. The answer denies this allegation, and avers that, at the date named, the capital was unimpaired, and that it now has a working capital of $9,000,000. Mr. Hash, the president, swears that the net working capital has been largely increased by profits, although, out of earnings, over three millions have been expended to discharge mortgage liens and to pay for construction.

It is also sworn to that the net earnings for the year ending October 31st, 1900, were $4,378,000; in other words, about eight per cent, of the par value of all the stock. How, on these facts, practically undisputed, I certainly cannot conclude that the smelting company’s stock does not fairly represent the value of its property. But it is said that Mr. Guggenheim’s affidavit shows that prior to December last the preferred stock was selling for ninety-one cents on the dollar and the common for forty-one, and that this is proof of what the property is really worth. Undoubtedly the market price of stock is some evidence of value, and often satisfactory evidence; but Mr. Untermeyer argued, and not without force, that investors are apt to look with some degree of doubt or suspicion upon a new industrial undertaking, and to manifest an unwillingness to take the stock at its real value until time has demonstrated the company’s stability and earning power, and he argued further that the stock of this very company which, in December, sold for ninety for the preferred and forty for the common, in the month following sold for ninety-nine and one-half and sixty-three, thus showing how uncertain an indication of the value of this particular property the market price of this stock is. Taking all the foregoing facts together, I cannot say that it is proved to my satisfaction that the property of the smelting company is not worth $54,800,000, and that consequently, on the basis of relative values, the Guggenheim property is not worth $45,200,000. But in view 'of the rule of law, as I have found it to be, this is not the whole question. I must be able to say, not only that I do not think the smelting company's property, and consequently the Guggenheim property, is not worth the sum named, but that the directors, in the bona fide exercise of their discretion, could not think so; that having consciously overvalued these properties, they resorted to the device of relative valuation to cover up what they knew. Of course, on the proofs as they now stand, such a finding is impossible.

But the complainants put their argument in another way. They say it is shown that the various plants, controlled by the Guggenheims are not worth more than from eight to ten millions, and that the cash which they are to contribute does not exceed twelve millions. For this twenty or twenty-two millions they are to receive, it is said, fifty-four millions. But this leaves out of view the good will of the Guggenheim business, the contracts and leases connected with it, the saving in freights, their business connections in both hemispheres, the getting rid of a competitor—a legitimate item of value, according to the cases (Rural Homestead Co. v. Wildes, 9 Dick. Ch. Rep. 668; Gamble v. Q. C. W. Co., supra), and several other considerations mentioned in the affidavit of Mr. Hash. It may be that all of these together, and, in addition, the earning capacity of the property (which for the year ending October 31st, 1900, is stated to have been $3,216,406.88 net), do not make up a value of $24,000,000, but inasmuch as the directors assert that they do, it is for the complainants to show, not only that they do not, but that these directors cannot honestly entertain that opinion.

If directors should purchase a thousand tons of coal, and issue full-paid stock for it at the rate of $6 a ton, while coal of the same kind could be bought in the market by anyone for $4, it would be easy for the court to say that their discretion was not honestly exercised; that they must have known that they were paying for it more than it was worth. In such a case, res ipsa loquitur. But where there is a vast property like the present, having so many elements of value outside of mere material substance, and not capable of estimation, except by experts, how, on the proofs as they stand, can I say that these directors have consciously disregarded the law? Much stress was laid upon the statement near the end of Mr. Guggenheim’s affidavit that he intends to secure the additional working capital which he is to contribute by sales of part of the stock coming to him. If he had bound himself to sell this stock, or any part of it, at a definite sum, less than par, there would be much force in the argument; but- he did not, and so, as the case stands, there is nothing in the arrangement itself to show that either Mr. Guggenheim or the directors dealt with the stock on the basis of less than its par value.

I think the injunction should be denied.


author: Stevens, V. C.

text:
    Robert Schrafft, executor, v. Mary Celina Wolters et al.
    [Filed April 5th, 1901.]
    At the time of testator’s death, securities belonging to him, and which were given by will to his wife, were in a compartment of a trust company’s vault, the compartment having been taken in the name of testator and the wife; and she refused to give the executor the key, and the trust company refused to surrender the securities.—Held, that a bill by the administrator for discovery and relief was not demurrable on the ground that complainant had an adequate remedy at law.
    On bill.

      Mr. Oscar Keen, for the complainant.

      Mr. James B. Nugent, for the defendants.
   Stevens, V. C.

This is a bill for 'discovery and relief. The defendants filed demurrers for want of equity. The case presented is this: Frederick E. Wolters died in May last. He left a will and appointed the complainant and the defendant Frederick H. De Bow his executors. They both qualified as such. Wolters left personal property amounting to $125,000, invested in bonds, mortgages and various stocks. Shortly before his death, for the purpose of safely keeping these securities, he "rented” a box (that is, as I understand it, a small compartment) in the vaults of the Fidelity Trust Company, and took such box in the name of himself and his wife. His wife now has the keys, and refuses to give them to the executors, or to allow them to take the securities from the box, or "to ascertain the number and amount of such securities and the value thereof.” By the will they are given (subject/ of course, to the payment of debts, &c.) to the wife.

De Bow, one of the executors, refuses to join in the suit as a complainant, and so he is made a defendant.

The legal situation is this: The securities belonged to the testator. At the time of his death they were in the custody of the trust company, who took care of them for him. Thereafter the executors became vested with his title, and so, in point of law, the trust company now holds the securities for them. Mrs. Wolters has neither the custody nor the legal title. But because she has the key, and because she will not consent to their delivery, the trust company will not surrender them, on the ground that “it would be improper and unwise on their part to act in the matter without an order or decree of this court.” ■

The defendants argue that the court is without jurisdiction, because the complainant has an adequate remedy at law, or, at all events, in the orphans court. But, as it is charged that the executors do not know yhat the securities are, it is manifest that trover or replevin would be a very inadequate remedy. As to the orphans court, it has jurisdiction over the executors, but not over the trust company .or Mrs. Wolters. Unless the executors have a remedy in this court, they will be unable to proceed in the execution of their trust. They can neither file an inventory nor an account, and they cannot pay the debts and legacies.

A bill for discovery would, of course, lie. But this would not be enough. .The complainant nee'ds something more than .a mere discovery of the nature, the amount and the value of the securities. The executors are entitled to examine them, and, perhaps, to dispose of them. They are also entitled, putting their equitable right at its very lowest, even if the whole estate be given to Mrs. Wolters, to take as many of them as they need to enable them to pay debts, expenses and commissions. They are also entitled to demand from Mrs. Wolters, before she can take the securities, a proper refunding bond. A court of equity is competent to give the relief prayed for. The doctrine applicable to the delivery up of title deeds also “applies to other instruments and securities, such as bond's, negotiable instruments and other evidences of property, which are improperly withheld from the persons who have an equitable or legal interest in them.” Story Eq. Jur. § 703. The following, among other cases, illustrate this rule: Banta v. Moore, 2 McCart. 97, 103; Pattison v. Skillman, 7 Stew. Eq. 344; Midland Railroad Co. v. Hitchcock, 7 Stew. Eq. 278; Stanton v. Percival, 5 H. L. Cas. 257. And. it is particularly applicable to the case of agents and others who, like the trust company, in a certain sense stand in a fiduciary relation to the plaintiff. Wood v. Rowcliffe, 2 Phil. 382. The cause in hand is not unlike Goodale v. Goodale, 16 Sim. 316.

The demurrer should be overruled.


text:
    John C. Bohle et al. v. Diedrich Hasselbrock et al.
    [Filed April 10th, 1901.]
    1. On an issue whether funds used by a life tenant and executrix in the purchase of land on January 1st, 1868, were in part funds of the estate, so as to create a charge on the land in favor of the remaindermen, it appeared that her deceased husband left several thousand dollars in various savings banks, and that on January 3d, 1866, she drew from a bank $2,080; on January 6th, from a trust account, $518.75; and from an individual account a like -sum; that on the 10th she deposited $2,000 in favor of her children, and in another bank $650 for herself; on January 15th she drew from a still different bank $1,600, and about the same time put on record a mortgage for $2,870. On July 18th, 1867, she drew from her decedent’s account $530.45, and a like sum from an individual account, and the same day deposited $1,310 in her individual account. The will authorized the executrix to use the principal of the estate to support the children. Her accounts as executrix were not shown, nor was there any evidence as to her private means.—Held, that the evidence was insufficient to show an appropriation of trust funds by the executrix.
    2. Where an executrix and life tenant uses both her own money and trust money in the purchase of land, the remaindermen do not have an equitable estate proportionate to the amount of the trust funds used, but merely a charge on the land, bearing interest from the life tenant’s death.

      Mr. Charles W. Parker, for the complainants.

      Mr. J. W. Rufus Besson, for the defendants.
   Stevens, Y. C.

Anton L. Bohle died in March, 1863. He left him surviving a widow, Anna, and four children, John, Anna, Anton and Sophie. Sophie married August Schroeder, and, in April, 1888, died without leaving issue. Anton L. Bohle left a will, by which he appointed his wife executrix and guardian of his children. By its third paragraph he gave (in substance) the interest and income of his estate to his wife for life, with remainder to his four children. He provided that if the income should not be sufficient to support and educate his children, his wife might use so much of the principal as was necessary for that purpose.

In August, 1864, the widow married Diedrich Hasselbrock, and had issue by him. She died in 1898. On January 1st, 1868, she purchased two lots of land in Hoboken. The complainants’ claim is that she purchased them with moneys belonging to the estate of her first husband, and that they are, therefore, bound by a resulting trust, or, at least, affected with a charge in their favor. By the second paragraph of her will she gave these lots to her three surviving children by her first husband, and so they take the fee in any event. If, however, the land is to be regarded as affected with a trust, Diedrick Hasselbrock, the second husband, has no curtesy; if it is not, then he has. If the land is affected with a charge, then the curtesy, is subject to the charge. The children are in possession, and he has instituted an ejectment to recover an estate by the curtesy. The present bill is filed-to restrain this legal proceeding.

It appears that at the time of his death, in 1863, Anton L. Bohle had accounts in Hew York savings banks, amounting, according to the calculation of complainants’ counsel, to $7,789.73. What other estate he had, except a small grocery business, does not appear. The evidence shows, and it is admitted by. defendants’ counsel, that on January 2d, 1868, the executrix drew from different savings banks various sums, deposited some in her own name, some in her late husband’s and some in her children’s, amounting, in the aggregate, to $10,430.35. Of this amount it is agreed that $6,423 were trust funds. The controversy is over 'the difference. • It is conceded by complainants’ counsel, however, that there is.no proof of the account ($1,497) in the Mechanics and Traders Bank, it having failed and its books having been destroyed, and it is only claimed that of the balance ($2,510.35) $1,289.45 can be traced into the trust funds. The dispute is, therefore, narrowed down to these last-mentioned figures. I think the evidence fails to indicate with sufficient certainty that any of this sum of $1,289.45 was trust money. The proof is only this: It appears from the itemized accounts that, on January 3d, 1866, the executrix drew from the Seaman’s bank, $2,080; from a trust account, $518.75; and, on Januarjr 6th, from the Bowery bank, from an individual account; $518.75; total, $3,117.50.

On January 10th she made deposits in the East Biver bank, for her children, to the amount of $2,000, and in the Metropolitan bank, for herself, $650. There is not the slightest evidence, other than that afforded by the above figures and dates, that the deposit of $650 made in the Metropolitan bank was part of the $3,117.50 thus drawn out. The court is asked to malee the inference that it was, from the short interval which elapsed between the making of the drafts and the making of the deposits. But it appears that one of the drafts ($518.75) was upon an account that stood in the name of Anna herself, and it further appears that, on January 15th of the same year, she drew from the Emigrant bank $1,660, and about the same time (as counsel for complainants states in his brief) put on record a mortgage for $2,870.

In such a state of the proofs it is impossible to make the inference contended for. Her executrix’s account, if she ever rendered one, is not in evidence. We do not know what the debts of the estate were, what her private means were, or whether she found it necessary to spend any of the principal for the education of her children. All we know is that on one day she drew out trust money and on a subsequent day deposited money, presumably her own, because put into her individual account. The court cannot assume a breach of trust without proof, or make an inference of guilt when it is quite possible that the transaction might have been innocent.

On July 19th, 1867, Mrs. Iiasselbrock drew from her late husband’s account in the Metropolitan Savings Bank '$530.45. She drew from an individual account in the same bank .a similar amount, and on the same day she made a deposit of $1,310 in another individual account also kept in that bank. The amounts drawn do not correspond with the greater amount deposited, and consequently there is nothing to indicate that the $530.45 taken from her late husband’s account was parcel of the $1,310 deposited in her own account, except they were drawn and deposited on the same day. Assuming that they were, it does not follow that the transaction was necessarily a breach of trust. She might have been entitled to reimbursement for something paid out of her own funds, in the execution of her duty as executrix and trustee. She had a right^ in certain contingencies, to spend principal. Twenty-four years have elapsed, and she is not here to explain what she did. ’ Under these circumstances, it is too much to say that it is clearly proven that the money was money’ of the estate. This fact, to use the words of Mr. Justice Depue, in Cutler v. Tuttle, 4 C. E. Gr. 560, must “be distinctly established by satisfactory evidence.” The record title to land cannot otherwise be affected by parol testimony.

The remaining item of $109 is open to the same objection. .

Of the price paid for the property ($14,700) my conclusion is that only $6,423 are shown to have been trust moneys.

It now remains to be considered whether the complainants have an equitable estate in the property proportionate to the amount contributed, or whether they have a charge. The complainants contend they have an estate. In Cutler v. Tuttle, supra, it is said, by Mr. Justice Depue, that there is no doubt that payment of part of the purchase-money will create a resulting trust to the extent of that payment, but that it will not arise upon payments made in common, when the consideration is set forth in the deed as moving solely from the grantee, unless satisfactory evidence is offered exhibiting the portion which was really the property of each, and establishing the fact that the payment was made for some specific part or distinct interest in the estate.

Much on the same principle, if the only facts appearing be that the grantee has taken a deed to himself, individually, and has used, in the purchase, both his own money and trust money, the court does not declare a resulting trust, but, says Mr. Perry, in his work on Trusts § 842, “usually gives a lien on the land only for the amount of the trust fund invested and interest.” To the same effect is Lew. Trusts 897, and the following cases: Lewis v. Madocks, 17 Ves. 55; Price v. Blackmore, 6 Beav. 507; In re Pumfrey, 22 Ch. Div. 260; Humphreys v. Butler, 51 Ark. 35A The statement of Mr. Bispham (§ 86). if he is to be understood as intimating that, in cases like the present, an estate and not a charge is given, is hardly borne out by the authorities. In one of the cases cited by him (39 Minn. 18) a resulting trust was said to have arisen, but in the greater number, only a lien was 'adjudged.' Such was the decision in 1 Rich. Eq. 426; 18 N. Y. 456; 149 Mass. 400.

If the court gives a lien in the present case, the intent of the testator will be effectuated. He directed that his money should be invested upon good bonds and mortgages of real estate. The charge will stand in place of the mortgage and interest will run from Mrs. Hasselbrock’s death. This conclusion will, however', necessitate amending the bill and making August Schroeder, the husband of the deceased daughter, a party.


author: Stevens, Y. 0.

text:
    Ruth Brooks v. John L. Wentz et al.
    [Argued April 18th, 1901.
    Decided May 1st, 1901.
    Piled May 2d, 1901.]
    1. Where the description of land contracted to be sold in an option is sufficient to identify the land with reasonable certainty, the option is sufficient to sustain a bill for specific performance.
    2. Where the owner of .land gave an option on August 24th, 1899, agreeing to convey the same on acceptance of the option at any time within one year, provided written notice of the acceptance was given at least thirty days prior to the expiration of the year, and -notice of acceptance was given on July 23d, 1900, the owner thereby became absolutely bound to convey to the purchaser.
    3. The owner of land heavily encumbered gave an option to convey it to complainant on her acceptance at any time within one year, agreeing to deliver a deed with full covenants of warranty, but, believing he would be unable to discharge the encumbrances, he executed another option to defendant on a larger tract, including the land first sold, which defendant accepted, and received a conveyance, with notice of plaintiff’s option. At the time of the conveyance, the purchase-money was distributed among the encumbrancers, and releases executed by them, all of which were in terms made to the original owner of the land, defendant refusing to pay the purchase-price, except as it might be applied in his presence to secure the releases.—.HeM, that such payment and application of the purchase-price discharged the encumbrances and merged the same in the title to the property conveyed by the owner to defendant, and hence he was not entitled to claim subrogation to the original rights of the encumbrancers on being compelled to specifically perform the option given by the owner to complainant.

      Mr. Robert H. McCarter, for the complainant.

      Mr. James Steen and Mr. Edmund Wilson, for the defendants.
   Stevens, Y. 0.

This is a suit for the specific performance of an accepted option to convey land. Performance is resisted on the ground (1) that the land is not described with sufficient definiteness, (2) that the contract was, in whole or in part, abandoned, (3) that if decreed, it can only be on the terms of reviving certain encumbrances which, prior to October 1st, 1890, rested on the land.

As to the first defence, it seems clear that it is not sustained. There is no difficulty in ascertaining exactly what land Lovatt, the owner, agreed to convey. Reasonable certainty in the description is all that is required. Robeson v. Hornbaker, 2 Gr. Ch. 60; Huffman v. Hummer, 3 C. E. Gr. 83; King v. Ruckman, 6 C. E. Gr. 606; S. C., 9 C. E. Gr. 556; Shardlow v. Cotterell, 20 Ch. Div. 90.

The second defence is equally unsustained. The letters of July 18th and 23d, written by Mrs. Brooks, and the notice served upon Mr. Steen on October 1st, only a few days before Dr. Wentz took his deed, show plainly that there was no abandonment of any right which the agreement gave.

The only question about which I have had any doubt is that which relates to the rights of the parties as affected by the situation of the property with respect to encumbrances. The facts pertinent to this part of the case are the following: On August 24th, 1899, John T. Lovatt, being the owner of several parcels of real estate at Bed Bank/all of them heavily encumbered, entered into a written agreement with the complainant, Buth L. Brooks, to convey to her a country place near Bed Bank for $11,000. The conveyance was actually made on September 8th, 1899. By the same agreement he gave her the option of purchasing, for the price of $4,000, what was described as “the balance of the hill property, so called,” lying immediately to the north of the property conveyed, and containing about four acres. The survey shows three and sixty-four hundredths acres. The option was “to remain in operation one year,” but written notice that Mrs. Brooks desired to avail herself of it was to be given at least thirty days prior to the expiration of the year. Fotiee, in writing, to that effect was given on July 23d, 1900, and thereupon Lovatt became absolutely bound to convey. Hawralty v. Warren, 3 C. E. Gr. 124. At the time when the agreement was made and up to the latter part of September, 1900, the land was encumbered by four mortgages and two judgments. The mortgages originally amounted to $20,800, and covered other lands as well as the locus in quo, but they had been paid in part. The judgments amounted to $3,475.05. There was, in addition, another mortgage, for $3,642, which did not cover the locus in quo, but did cover part of the other lands.

The option to Mrs. Brooks was given, as I have said, on August 24th, 1899. Before it was accepted, Mr. Lovatt, the owner, by a writing, dated April 20th, 1900, agreed to convey the l$nds covered by this option and an adjoining piece of land, containing about six acres, to Dr. Wentz, for the price of $10,000. Feither Dr. Wentz nor Mr. Lovatt was sworn, and so we do not know positively whether Lovatt then stated to Wentz that he had given this option. The agreement does not mention it. This is, however, immaterial to the present inquiry, because it conclusively appears that Mr. Steen, who acted as attorney for Wentz, very early in the transaction, and before any money was paid to Lovatt or on his account, got actual knowledge of it. With this knowledge, and with knowledge, too, by Mrs. Steen that the complainant had accepted the option, Lovatt gave a deed to Wentz some time between October 1st and October 8th, 1900. The insistment is, of course, that Wentz, taking with, notice, is bound to convey the land mentioned in the option, just as Lovatt would have been bound to convey had he remained the owner.

The reason why Lovatt did not convey to Mrs. Brooks was that the option called for “a deed of warranty, with full covenants, conveying the property free and clear of all encumbrances.” Such a title Lovatt thought he was unable to give. The evidence is that the encumbrancers refused to release the four-acre tract on receipt of the price of $4,000, although they were willing to release the ten-acre tract (which included the four-acre tract) on receiving the price of $10,000. Dr. Wentz’s attorney had tried to secure an assignment of the option of Mrs. Brooks and had failed, and the only explanation that suggests itself of his willingness to take title, when he knew that Mrs. Brooks had a superior claim, which she would not surrender, is that he knew that she had refused to take an encumbered title, and that he may have thought that she would not, perhaps, under the circumstances, bé willing to sue for specific performance against the view of her then attorney, Mr. Degnan, who seems to have supposed that her remedy was, under the circumstances, a suit at law for damages. But while Mr. Degnan had, during the summer, expressed this view to Mr. Steen, not as the opinion of Mrs. Brooks, but as his own opinion, he, on October 1st, only five or six days before the conveyance to Dr. Wentz was made, pursuant to the explicit direction of Mrs. Brooks, served a notice on Mr. Steen, which took away all semblance of right on his (Steen’s) part to suppose that Mrs. Brooks’ claim would in any respect be given up. Probably it was thought that Dr. Wentz would not be seriously injured, because he would, in any event, receive the price of the property, and might, in acquiring title, be in a better position to negotiate. He desired to utilize the hill for a stand-pipe, to be erected by a water company in which he was interested, and the risk, he may have, thought, was worth taking.

I-Iis position in the matter is such that I do not think he is entitled to any special consideration at the hands of a court of equity—to anything more than his legal rights.

How, it is perfectly well settled that if an owner agrees to sell, and then conveys, in breach of his agreement, to a third party having notice, the grantee stands in no more favorable position than the grantor. This is conceded. But it is said that if the court decrees performance, it should, as against the complainant, regard the encumbrances which rested upon the property just before Lovatt conveyed as still subsisting. The situation was this: On October 6th, or 7th, the attorney of Lovatt and Wentz got together the encumbrancers, or their representatives, obtained from them releases, or, in the case of the bank judgment, a promise of release. Mr. Steen, on behalf of Dr. Wentz, then produced the $10,000, and this was divided among the encumbrancers. All the releases but two were, in terms, made to Lovatt. Two, however—a small judgment for $106 and a mortgage for $1,300, on which $700 was paid, both held by Julia T. Lovatt—were released to Dr. Wentz.

The contention of Dr. Wentz is that, by the agreement of April 20th, 1900, he became the equitable owner of the land, and that when his money was paid it was really paid to protect his interest as such, and that he thereupon became entitled to be subrogated to the rights of the encumbrancers to the extent of his payment. Passing by other objections to this argument, it is plain .that, on the theory that Wentz became the equitable owner of the land by mere force of the agreement, and notwithstanding the prior right of Mrs. Brooks, Lovatt became the equitable owner of the money; and so it was not Wentz's money 'that paid the encumbrancers, but Lovatt's.

In Duncan v. Smith, 2 Vr. 325, 329, it is said, by Chief-Justice Beasley, that the general rule is “that whenever the money due upon a mortgage is paid, it will operate in law either as a discharge or an assignment, as will best subserve the purposes of justice and the just intent of the party," and in Wade v. Miller, 3 Vr. 296, 308, the same judge, after remarking that the rule is not founded on any secret or undisclosed intention of the person interested, but is always rested on an intention to be deduced from the facts of the case, continues as follows: “If the owner of an equity of redemption should acquire the mortgage title, and should then cancel it upon the record, no circumstance would remain from which an inference could be drawn of an intent to keep alive such an estate, and consequently a merger would inevitably be effected.”

ISTow, judged by this rule, it seems to me perfectly clear that, in the present case, it was the intention to discharge the liens upon the ten-acre tract, and not to keep them alive. Plainly it was beneficial to Dr. Wentz to discharge them upon the six-acre tract, and so an intention to discharge them as to this tract would be inferred, and no different intention appears with respect to the four-acre tract. But we have conclusive evidence of intention outside of this. In the first place, in the case of the mortgages not paid in full, the releases are, in terms, a discharge of the land from the lien; in the second place, in the ease of the Davis mortgage, the largest of all that was paid in full and was canceled of record, and in the third place, Dr. Wentz’s attorney, so far from declaring that there was any idea of keeping the encumbrances alive, says that he refused to pay over the purchase-money except as it might be applied in his presence to secure releases. It must be remembered, too, that the debts so paid were all the personal debts of the mortgagor, whose money went to pay them and whose interest it was not to keep them alive. On the reasoning of the above cases and ,of Adams v. Angell, 5 Ch. Div. 634, I must hold that the lien is extinguished.

Under these circumstances, I think there is no ground for the application of the doctrine either of subrogation or of equitable assignment. Dr. Wentz, taking with notice, became,' constructively, a trustee for the complainant. She has done nothing to discharge the trust, and the situation is the same now that it was at the time of the conveyance. The complainant is entitled to relief.


author: Urey, Y. C.

text:
    Otto Snyder v. Edward P. Harris.
    [Filed February 7th, 1901.]
    1. To make a witness incompetent to testify to a transaction with, or a statement by, a decedent, he must have been a party to the suit when objection was made to his testimony on such points. If he were not a party when such testimony was given, it cannot be stricken out in ease he afterwards becomes a party.
    2. A person who is presently entitled to substantially all of the benefits of a foreclosure suit if it be successful, ought to be made a party complainant.
    3. If such a person be not made a party to the suit, in order that he may prove a transaction with a decedent which he could not do if he were a party, and his secret interest only appears in his cross-examination, his testimony is seriously discredited. His conduct is an imposition upon the court.
    4. A donatio causa mortis should be proved by testimony which satisfies the court that there was an actual gift of the property in question by the decedent while under an apprehension of death.
    On bill, answer, cross-bill and answers thereto, and proofs.

      Mr. William J. Thompson, Mr. TJlysses G. Styron and Mr. Jonas 8. Miller, for the complainant.

      Mr. William M. Clevenger, for the defendant Edward P. Harris, the mortgagor, and George B. Harris, the grantee of the mortgagor.

      Mr. Herbert A. Brahe, and Mr. Edgar N. Black (of the Philadelphia bar), for the defendant Charles J. Costello, as administrator and next of kin of Hannah McEadden, deceased.
   Urey, Y. C.

(orally).

This cause has been argued in part on one day and in part on another, with very full citations of authorities. I have not only heard the testimony, but have had an opportunity to read some considerable part of it, which has been written out by the stenographer. I think I can state my conclusions now quite as fully as if I gave the matter further investigation.

The litigation now coming to a close in this case was begun by the filing of a bill of complaint by one Otto Snyder, to foreclose a mortgage made by Edward P. Harris to Hannah MeFadden, dated the 26th day of July, 1897, to secure the payment of $1,000, upon lands situated in Atlantic City.

The plaintiff (Snyder) alleges in his bill that on or about the 27th day of December, 1897, Miss McFadden, the mortgagee, being in her last illness, gave the mortgage causa mortis to one George M. Beueker, and delivered it into his possession, with the bond accompanying the same. It charges that that delivery into his possession, though unaccompanied by any written or other assignment than delivery, passed the title to the said Beueker. The bill further alleges an assignment by Beueker of the bond and mortgage to Snyder, the complainant in this suit.

The bill then proceeds to set out the claims of the various defendants against the mortgaged premises, and calls in as defendant one Charles J. Costello, who, the bill says, claims to be administrator of Hannah McFadden, and to have some interest in the bond and mortgage. There was an error made in the original bill in asserting that Edward P. Harris was the owner of the equity of redemption. This was corrected by subsequent amendment, by which George B. Harris, who, before the filing of the bill, had, by purchase from Edward, become the owner of the equity of redemption, was brought in as defendant. The litigation proceeded as against the parties to the bill, and an answer was filed by Mr. Costello, administrator of Hannah McFadden, accompanied by a cross-bill. In his answer he denies the transmission of the bond and mortgage by donatio causa mortis from Miss McFadden to Mr. Beueker, and in his cross-bill he alleges that the bond and mortgage were taken by Mr. Beuclcor, without authority or right, the day after Miss McEadden died, and prays that it may be delivered to him as part of Miss McEadden’s estate. In this situation of the case, Snyder, the complainant, was claiming from the mortgagor the payment of the mortgage, and demanding a sale of the mortgaged premises. Costello was also claiming from the mortgagor payment of the mortgage in his right as administrator of Miss McEadden, and asserting that he was the owner of the mortgage, and that it ought to be delivered to him.

George B. Harris, the owner of the equity of redemption, then filed an answer and cross-bill, in the nature of an interpleader, in which he set up the conflicting claims of these opposing parties to the bond and mortgage, and stated that he was entirely willing to pay the mortgage-money, but he could not, with safety, determine their conflicting claims, and. pay it to either, and asked to have his rights protected by a decree that the contesting parties settle their claims by interpleading. Some litigation was had between George B. Harris, on the one side, and Costello, on the other, as to the right of the former to maintain his cross-bill of interpleader. That has been heard. • It was determined that Harris had a right to be protected against the conflicting claims of these two parties, and he was dismissed upon paying the mortgage-money into court. That money now stands in the place of the mortgaged premises, and the litigation has proceeded since that time between the complainant (Snyder), claiming to be the owner of the mortgage, on the one hand, and Charles J. Costello, the administrator of Hannah McEadden, claiming to be the owner of the mortgage, on the oilier hand.

A very considerable amount of testimony has been taken (which was let in because it might possibly be useful), some of it of quite doubtful admissibility, but the case can be determined without reference to hearsay testimony, or to the declarations of Miss McEadden, which were offered on the part of the defendant Costello, going to show that she did not -want any of her property to go to.Mr. Beucker, and that she was disposed to make a will, and give it to Miss Du Hey. T shall not depend upon this testimony in arriving at my conclusions. The whole case, so far as the ownership of this bond and mortgage, or the mortgage-money as it presently stands, depends entirely upon the transactions alleged to have taken place between Miss Mc-Eadden and Mr. Beucker on the morning of December 26th, 1897, the day before she died.

The complainant alleges that those transactions were of such a character as to pass to Mr. Beucker, by donatio causa mortis, the ownership of the bond and mortgage. The complainant must therefore undertake the responsibility of affirmatively showing that condition of facts by a preponderance of proof.

There is but a single witness who attempts to prove that there was any gift by Miss McEadden to Mr. Beucker of the bond and mortgage now in suit. This is Mr. Beucker himself. He testifies that on the morning of December 26th, 1897, he called on Miss McEadden, in her sick-room; that Miss Duffcy, her attendant nurse was there, but that during Miss Duffey’s temporary absence, while he and Miss McEadden were alone together, she told him to get her cabba, which he handed to her, and that she took from it the bond and mortgage in question, and also another one, and gave them to him. Ho other witness even claims to have any knowledge that there was any such gift by Miss McEadden to Mr. Beucker. Of course, no witness could contradict Mr. Beucker’s statement that there was a gift mortis causa, because the alleged gift is stated by Mr. Beucker to have been made to him by Miss McEadden at a time and place and under such circumstances that no other person than himself could have any knowledge on the subject, Miss McEadden being now dead.

The testimony of Mr. Beucker is sought to be sustained by two witnesses. One, a Mr. Moffit, who testified that Mr. Beucker brought to him on the evening of December 26th, a package of papers for safekeeping, and among them the bond and mortgage in question. The whole significance of this testimony was to show that Beucker had the bond and mortgage in his possession on the evening of the 26th, the day he claims Miss McEadden gave it to him, and while she was yet alive, for she died about one o’clock in the early morning of the 27th. This witness Moffit had no acquaintance whatever with the bond and mortgage in question—he had no reason to notice it. He did not examine or unfold the papers, but claims, by a mere glance at them, to have so noticed them that he can, with certainty, a long while afterwards, identify them. His testimony, if true, would support Mr. Beucker’s testimony, not absolutely, but only to a slight extent. It would not show at all that Miss McFadden gave the bond and mortgage to Beucker. But the testimony of the witness Moffit was neither in the manner of its delivery nor in the matter of its statement satisfactory to show even an' indentification of this bond and mortgage. He was not one who was in any way familiar with such papers; he had no interest in them. The fixing of the time of the exhibition of the bond and mortgage to Moffit on December 26th was essential to give any value to his testimony, for, on the defendants’ theory, which I shall shortly refer to, it is claimed that Beucker took them from Miss McFadden’s cabba on December 27th, the next day. So that, if he gave them to Moffit on the evening of December 27th, instead of the 26th, the latter’s testimony is of no aid to Beucker’s claim that the mortgage was given him by Miss McFadden on the morning of the 26th. Mr. Moffit’s testimony, fixing the date on December 26th, after several years had elapsed, appeared to be an arbitrary selection of a convenient date, rather than a recollection of a remembered day. His manner when on the stand was quite uncertain and unimpressive.

Another witness, a Mrs. Robinson, called by the defendants, is claimed to support Mr. Beucker’s story that Miss McFadden gave him the bond and mortgage. It was in Mrs. Robinson’s house that Miss McFadden was living. Mrs. Robinson testified that there was a period of time when Mr. Beucker was alone with Miss McFadden in her room. Mrs. Robinson did not say that she saw Mr. Beucker alone with Miss McFadden in her room, and she knew nothing of the alleged gift. She appears to have inferred, from the circumstances, that she saw Miss Duffey, Miss McFadden’s attendant, out of the room; that there was a period of time when Mr. Beucker was in the room alone with Miss McFadden. Of course, such testimony does not prove á gift; it simply suggests á possible opportunity for a gift by Miss McFadden when no one.was present but Beucker. The corroboration thns offered of Mr. Beucker’s testimony is of the very least possible weight.

The defendants claim that they show the testimony of Mr. Beucker, as to this gift, to be untrue, by the evidence of Miss Anna Duffey, who was in attendance upon Miss McEadden, as her friend and nurse, and was in Miss McEadden’s room, in that capacity, on the 26th day of December, when Mr. Beucker came there. Miss Duffey swears that she was in Miss McEadden’s room at the time Beucker arrived, and that she stayed there during the whole period that Mr. Beucker was in the house. She claims that she was in attendance upon Miss Mc-Eadden during the whole time that Mr. Beucker was in her room, and that no such transaction as is detailed.by Mr. Beucker either did happen or could have taken place.

Miss Duffey’s testimony, though necessarily negative in character, is in direct contradiction of the private interview narrated by Mr. Beucker, and if she is accurate, it must be held to refute his whole story of the gift mortis causa. Miss Duffey further states that on the morning of December 27th,. after Miss MeEadden’s death, Mr. Beucker came to Miss McEadden’s room and asked for the cabba containing the latter’s papers. Erom this cabba, while open on Miss Duffey’s lap, Mr. Beucker took a package of papers. Miss Duffey could not, with certainty, identify them as the bond and mortgage in question. Mr. Beucker himself admits that, on the morning of December 27th, he did take from Miss McEadden’s cabba, while it was on Miss Duffey’s lap, some papers, but he claims they were certificates, which he wished to use to secure the services of the undertaker. This testimony is not without significance. Both parties appear to .admit that Miss McEadden kept the bond and mortgage in her cabba. Beucker says that he, at her direction, took the bond and mortgage from this cabba on December 26th. If he did not, he certainly had the opportunity to take it from the same cabba on December 27th, and if he did then take them, this would account for his subsequent actual possession of these papers.

Miss Duffey is entirely disinterested in this case. She was in actual charge of Miss McEadden in her sick-room, at the time when, the events in question must have taken place; it is in every way probable that she would have remained in actual attendance, as she swears she did, upon'her sick friend during Mr. Beucker’s visit. Her testimony is attacked as influenced by -pique or envy, but there was nothing, in either the matter or the manner of it, which indicated that she was actuated by any such feeling.

Thefee narrations of circumstances, which, while not directly contradictory, are jet irreconcilable with each other-—create a situation in which it is of the utmost importance to ascertain what value should be given to the testimony of Mr. Beueker, because on that, and that alone, if a decree is to be made in favor of the complainant in this case, must such a determination depend.

The court of errors and appeals, in the case of Keepers v. Fidelity Trust and Deposit Co., 27 Vr. 308, in discussing the decisions of other states, in which gifts of this character have been' received with considerable favor, or at least indulgence, says:

“We agree with the sentiments expressed in Ridden v. Thrall, 125 N. Y. 572, that ‘public policy requires that the law regulating gifts causa mortis should not be extended, and the range of such gifts should not be enlarged.’ When it is remembered that these gifts come into question only after death has closed the lips of the donor; that there is no legal limit to the amount which may be disposed of by means of them; that millions of dollars’ worth of property are locked up in vaults, the keys of which are carried in the owners’ pockets, and that, under the rule applied in those cases, such wealth may be transferred from the dying owner to his attendant, provided the latter will take the key and swear that it was delivered to him by the deceased for the purpose of giving him the contents of the vault, the dangerous character of the rule becomes conspicuous.”

In this cause, upon the sole testimony of Mr. Beueker, a gift mortis causa of a bond and mortgage is attempted to be shown. His testimony, therefore, must be examined with a very careful scrutiny to see whether it is of such a credible character, and from such a disinterested standpoint, that this court ought, upon his testimony alone, to decree a change of ownership in a thousand dollars’ worth of property.

There are many elements in this ease which have led me to doubt the sincerity and truth of Mr. Beucker’s testimony. In the first place, Mr. Beucker’s manner on the stand was not satisfactory. lie created no belief that he was testifying under' a conscious recollection of facts which his memory recalled. It is necessary, in order to maintain the complainant’s case, that not only a gift of the property should be shown, but also, in support of both the allegation and argument for the plaintiff, that it was a gift mortis causa, and it must be proven, as an incident of such a gift, that it was made in apprehension of death. Mr. Beucker. was called for the purpose of proving this fact. He was the only person present when the alleged gift was made, and must have known what inducements operated upon Miss McEadden to make it. It required about three and a half pages of questions of the most leading character to induce Mr. Beucker to state, as he finally did, that Miss McEadden, at the time of giving him the bond and mortgage, did say that she was making the gift in apprehension of her death. Before Mr. Beucker’s examination was concluded it was drawn from him, on cross-examination, that he is himself the person who is substantially interested in the success of the complainant in this cause. His assignment of the bond and mortgage to Mr. Snyder, the nominal complainant, was shown to have been made without any consideration passing to him (Mr. Beucker). It was made to secure the payment of a debt of less than twenty dollars, owed by Beucker to Snyder*. Mr. Snyder, the ostensible or nominal complaixxant ixx this case, has, therefore, an interest of but $20 iix this suit, while Mr. Beucker, though the fact is not disclosed in the bill of complaint, is, in fact, interested to the extent of all the rest of the mortgage-money. Practically, he has an interest of at least nine hundred dollars in this suit.

Tlxe assignment of the bond and mortgage by Beucker to Snyder was not claimed by Beucker, in his testimony, to have been a sale. It was simply an assignment to Mr. Snyder, because Beucker owed him $20. The inference is, therefore, irresistible that all that is due upon the bond and mortgage, above $20, is to come to Mr. Beucker himself. He is really, therefore, in the position of a complainant. Not on the record, but going behind the record, to the real facts of the case, this bond and mortgage is being foreclosed, though in the name of Snyder, as complainant, for the benefit of Mr. Beucker. He testified that he made this assignment under advice of his attorney, and it may fairly be believed that this was not done in ignorance of the fact that if Mr. Beucker had filed this bill in his own name, the law of this state would have excluded him from the witness-stand to prove Miss McEadden’s donatio causa mortis. But the bill of complaint having been filed in the name of Snyder, the statute of 1880 (which excludes parties to the suit from giving testimony as to transactions with, or statements by, decedents, where defendants are sued in a representative capacity) did not apply to exclude Mr. Beucker, because he was not himself a party to the record.

It was moved that Beucker Be made a party, and that his testimony as to transactions with, and statements by, Miss Mc-Eadden be stricken from the evidence, and under ordinary conditions it would have been required that he be made a party. But this motion was made after his testimony had been taken, and would not have excluded it. He was a competent witness when his testimony was given, and his subsequent introduction as a party would not make it inadmissible, though he might thereafter have been incompetent. Beckhaus v. Ladner, 3 Dick. Ch. Rep. 161. The hearing in this cause might have been so conducted as to have excluded the testimony of Mr. Beucker as to his transaction with Miss McEadden. He might have been cross-examined, at the opening of his examination in chief, as to his interest. If this disclosed his substantial ownership of the mortgage, it might then have been required that he should be brought in as a party to the record. In the case of Tyson v. Applegate, 13 Stew. Eq. 305, the court of appeals held that all persons interested in the proceeds of a mortgage foreclosure (unless the number was so great that it was impossible practically to bring them in) must be'parties. It is the established practice in this state that cestui que trusteni of the mortgage-moneys must be parties. That is Mr. BeuckeEs position—the mortgage being foreclosed is to be collected, in great part, for his benefit. If he had thus been made a party before he had testified he eonld hot have given evidence as to transactions with, or statements by, Miss McEadden, whose representative was a party defendant.

Although Mr. Beucker’s testimony as to transactions with Miss McEadden .cannot, for the reasons stated, be stricken from the record, it is a very different matter when this situation of affairs is suggested as affecting his credibility as a witness. He comes upon the stand, in truth, thé claimant of substantially all of this mortgage-money, without "disclosing that fact until it is wrung from him at the tail-end of his cross-examination. Ho is the real complainant, but puts Mr. Snyder forward as the apparent complainant, in order that he (Beucker) may go upon the stand as a witness and give testimony which he could not have given had his .real relation to the case been previously disclosed. He attended every one of the several days of the hearing, appearing to be the actually interested complainant; Mr. Snyder not appearing at all. Such conduct throws serious doubts upon a story, already doubtful, as narrated by him.

There is another phase of this dispute which discredits Mr. Beucker’s story. The transaction whereby Mr. Beucker claims to have obtained possession of this mortgage by Miss McEad■den’s gift took place on the 26th day of December, 1897. Shortly after that date the attorney for Mr. Costello claimed a delivery from Mr. Beucker of the property which he had in his possession belonging to Miss McEadden. Mr. Beucker thus knew that there was a claim on the part of the representative of Miss MeEadden’s estate for this bond and mortgage. This was about ten days after the date on which Mr. Beucker claims they had been given to him, and it would have been entirely -natural, if, in fact, there had been such a gift, that Mr. Beucker should, by that time, have asserted it. But Mr. Beucker, in answer to this demand, did not say a word about a gift mortis causa of the bond and mortgage, though he was then acting under advice of counsel, nor was the subject of such a gift mentioned until several weeks after Miss MeEadden’s death.

Another element required in proof of a gift mortis causa is that it be shown that the donor made the gift while under an apprehension of death. Mr. Beuekcr’s own testimony was far and away from showing such a condition. On the contrary, in one part of his testimony, he showed that there was no such apprehension, but that Miss McEadden sat up in bed at the time of the conversation which resulted in the gift of this mortgage, and was looking pretty well. It required, as stated, the most persistent leading questions to induce Mr. Beucker to swear that she apprehended her death at the time of the alleged gift. She was undoubtedly ill, but her extreme illness did not supervene until the evening of December 26th, several hours after the alleged gift.

The .defence insists that Mr. Beucker took this bond and mortgage, with another, on December 27th, after Miss McEad-' den’s death, from the cabba where she was in the habit of keeping them, the cabba being then in the actual manual custody of Miss Duifey. .The testimony going to identify the bond and mortgage as among the papers then taken is not strong enough, conclusively, to prove that fact, but it docs not at all follow that because the defendants do not conclusively show how Mr. Beucker got the bond and mortgage, that he, therefore, got them in the way in which ho claims they came to him. Tire complainant has specifically alleged that the bond and mortgage were given mor Us causa by Miss McEadden to Mr. Beucker. The testimony offered to support this claim is incredible and insufficient. It was quite within probability that the bond and mortgage were, in fact, taken from the cabba on the morning after Miss McEadden died. All agree that Mr. Beucker then took some papers, the bond and mortgage were usually kept in that cabba whence he took them, and he then certainly had an opportunity to have gotten them into his possession.

For the reasons above indicated, when the' essential proofs come from a witness who is the substantial, though concealed, complainant in the cause, who .tells a story which, both the manner of telling and in the matter of it, is incredible, I' am not satisfied to make a decree that this mortgage passed by gift viortis causa from Miss McEadden, in her lifetime, to Mr.George H. Beucker.

When the title of Mr. Beueker is overthrown, it follows, necessarily, that the title of Mr. Snyder, the ostensible complainant in this suit, must go with it. The decree, therefore, should be in favor of the defendant Costello, administrator of Miss McEadden’s estate, that the bond and mortgage in question were, at the time of the death of Hannah McEadden, a part of her estate, and that they should be recovered and delivered over to her administrator, the defendant Charles J. Costello, in accordance with the prayer of his cross-bill. But the mortgage, in the present situation of the case, is represented by money in court, which should lie decreed to be paid over to the defendant Charles J. Costello, administrator of Miss McEadden.

I will advise such a decree.