text:
    Carrie Kuntz v. Jacob Kuntz.
    [Decided June 18th, 1912.]
    1. In a wife’s suit for maintenance, the court cannot, after the parties have become reconciled and resumed cohabitation, order the husband to pay a counsel fee to the wife’s attorney on the theory that the attorney’s services were necessaries, since the husband’s liability is only for such necessaries as are required to maintain her as his wife, and not such as to provide for her future condition as a single woman.
    2: Where, while a bill for maintenance was pending, the husband and wife were reconciled and resumed cohabitation, the cause of action was thereby abrogated, although the bill was not formally dismissed; and neither party could take any action adverse to the other, and hence a motion by the wife’s counsel for counsel fee, necessarily made in her name, was not maintainable.

      Mr. Abe J. David, for the motion.
   Howell, V. C.

This is a suit between husband and wife; she files her bill for maintenance under the statute. Before the suit had proceeded to hearing a reconciliation was effected between the parties by the efforts of counsel, ancl, as was stated by counsel at the argument, all offences were condoned and cohabitation between them was resumed. Counsel for the complainant now moves for a counsel fee, to be paid by-the husband. The motion is undefended, and the question is whether, under the circumstances, it •can be allowed. It was claimed on the- part of the complainant’s counsel to he payable on the ground that it comes within the •category of necessaries for which the husband is bound at common law. ' There may be cases which hold this, but the better •opinion is the other way. The supreme court of Connecticut, in' Shelton v. Pendleton, 18 Conn. 423, held that the duty of providing necessaries for the wife is strictly marital and is imposed by the common law in reference only to a state of coverture and not of divorce. By that law a valid contract of marriage was, and is, indissoluble, and therefore by it the husband could never have been placed under obligation to provide for the expenses of its dissolution; such an event was a legal impossibility. Necessaries •are to be provided by a husband for his wife, to sustain her as his wife and not to provide for her future condition as a single woman or perhaps as the wife of another man. To the same effect are the opinions of Williams v. Monroe, 18 B. Mon. 514; Morrison v. Holt, 42 N. H. 478; Coffin v. Dunham, 8 Cush. 404. It will be found upon an examination of the cases that the courts which have decided otherwise have been constrained to do so by the terms of some controlling statute; it has been held in this state that an action will not lie directly against the husband for services rendered by a solicitor to the wife on an application in defending a divorce suit, and that the solicitor’s only remedy is by application to the court of chancery for an allowance. Westcott v. Hinckley, 56 N. J. Law (27 Vr.) 343.

There is, however, another reason why this motion cannot prevail, and that is that the reconciliation between the parties has •abrogated the cause of action, and the suit as a legal proceeding no longer exists. It is true that it has not been formally ended by a dismissal of the bill, but it is likewise true that neither party can fake any adverse step in the cause, for the reason that ■no cause of action exists. The present motion is by the counsel for the wife, but it is made in her behalf, because all proceedings of this nature must be in favor of the wife and all costs and counsel fees which are awarded in the suit must be awarded to her, and only she can proceed in her own name for costs and counsel' fees or prosecute the husband for disobedience of an order in relation to the same. To permit a motion of this sort to be prosecuted on behalf of the wife against her husband after they have been reconciled to each other and have resumed cohabitation and are living together in a state of amity would be an ancmaty. It would be continuing the litigation after the parties had put an end to it, and would have a tendency to break up the reconciliation and cause a resumption of the litigation. In Hadden v. I-Iadden, 18 Q. B. D. 778; 56 L. J. M: 69, the facts were that a husband had been summarily convicted of an aggravated assault upon his wife. The justices before whom he was' convicted made an order under the Matrimonial Causes act that the wife be no longer bound to live with him, and that he should pay her one pound a rveek for her support. After a short separation the husband and wife became reconciled and lived together for a year, when they finally separated. It was held that the legal existence of the support order was put an end to by the subsequent reconciliation of the parties. Mr. Justice Hawkins says: “In my opinion the effect is to put an end to the legal existence of the order and render it no longer operative. The court or magistrate has only power to make the order for separation if satisfied that the future safety of the wife is in peril, and when made the only effect of it is to relieve her from any obligation to cohabit, leaving her at full liberty to do as she pleases. If before acting upon the order she thinks fit to abandon it and become' reconciled to her husband, and continues to cohabit with him, she may do so; so, also after separation for a time, she may return to cohabitation; - but in either of. these events the validity of the order ceases, just as a decree for judicial separation would under similar circumstances.” This doctrine appears to have been announced by Lord Eldon in Bateman v. The Countess of Ross, 1 Dow. P. C. 235, and also in Nicol v. Nicol, L. R. 31 C. D. 524; Linton v. Linton, L. R. 15 Q. B. D. 239; 54 J. L. Q. B. 529. Haddon v. Haddon and Bateman v. The Countess of Ross, supra, were followed in the divorce division in Williams v. Williams (1904), Prob. 145; 73 L. J. P. 31. These authorities are so consonant with reason that I do not hesitate to adopt them and to make them the basis of my decision of this motion. The wife, by returning to her husband, and the resumption by them of their wonted marital relations, has ended all litigation between them and has rendered it impossible for this court to make any adverse order in the cause, or perhaps any order whatever except an order dismissing the bill.


source: Caselaw Access Project

author: Howell, V. C.

license: Public Domain

text:
    John W. Gosman v. Henry Pfistner.
    [Decided June 24th, 1912.]
    1. Where the record title to land shows a conveyance by a trustee to a third person, and a reconveyance to the trustee individually, a purchaser- will not be compelled to take such title.
    2. A purchaser of land has constructive notice of what appears in antecedent title deeds.
    3. Where a conveyance of land by a trustee to a third person, and a reconveyance to himself individually, were mdde only- eight years before a suit for specific performance, the title will not be held marketable under the rule that after the lapse of a long period of time 'equity will presume that a trustee accounted to the beneficiaries and that all claims against him were barred by delay.
    4. An outstanding tax title does not render the title to land unmarketable, where no entry under such tax title has been made within twenty years, since it is barred by the common law limitation.
    5. Specific performance of a contract for the sale of three lots will not be decreed as against the purchaser, where the title to one of the lots is defective.

      Mr. J. Henry Harrison, fox the complainant.

      Mr. Spaulding Frazer, for the defendant.
   Howell, V. C.

This is a hill for the specific performance of an agreement to convey real estate. The defendant objects to the title tendered by the complainant for the reason that it is not a marketable one, and he relies upon the title deeds for a demonstration and defence of his position. There are three tracts described in the agreement, as to one of which there is no objection; as to the' other two the objections are as hereinafter stated. For the sake of convenience I will refer to these two as tracts A and B.

The record shows that prior to June 3d, 1876, one William Nelson held a mortgage on tract A, which mortgage after his death was foreclosed. At the foreclosure sale the land was bought in by the executors and trustees under his will, and the title taken from the sheriff to them as such executors and trustees on the date last named. No other step occurs in the transaction until August, 1906, during which time two of the executors and trustees died, leaving Thomas Nelson as sole surviving executor and trustee. On the last-named day he, in his capacity of executor, transferred the title to William H. Eobinson, who in turn transferred it back to Thomas Nelson, individually, both deeds being in consideration of one dollar and other valuable considerations. Thomas Nelson subsequently died leaving a will by which he gave to his executors a power of sale of his real estate, by virtue of which power they conveyed the premises'in question to one Klimbaeh, who conveyed to the complainant, Gosman. The question in regard to this tract is whether enough appears upon the record to make the title unmarketable. It was held in the leading case of Smith v. Drake, 23 N. J. Eq. (8 C. E. Gr.) 302, that if an administrator or other trustee, directly or indirectly, should purchase lands at a sale made by himself as such, the sale would be set aside on application of the parties interested. In that case an administrator sold lands at public auction and obtained therefor a fair price, but the property was bid in for himself by one of his friends. The sale was set aside and an accounting ordered upon the ground that the administrator became a constructive trustee for the parties in interest. A purchaser of land is bound by constructive notice of what appears in the antecedent title deeds. Here is a disclosure by these documents that Thomas Nelson held the title to the land in question as trustee under his father’s will for thirty years, and that be then procured the land to be conveyed to himself. This is notice to the defendant of an irregularity which might affect the title to tlic lands. The case of Tillotson v. Gesner, 33 N. J. Eq. (6 Stew.) 313, is almost on all fours with the case in hand. That was a case for specific performance in which it appeared that there was a conveyance of land voluntary on its face made by a defendant in a suit just before a judgment for a large sum was rendered against him, which would have been a lien on the land if such conveyance had not been made. Specific performance of the agreement was not enforced upon the ground that there was apparent uj>on the face of the papers a situation which might subject the purchaser to litigation and make the title doubtful, and that if the title to land be doubtful, equity will not compel the defendant to take it and so expose himself to the hazard of litigation. Upon this theory courts of equity have frequently declined to compel a purchaser to accept a title which, though questionable, the court believed to be good. The case cited was followed in this court by Cornell v. Andrews, 35 N. J. Eq. (8 Stew.) 7, and affirmed by the court of errors and appeals in Van Riper v. Wickersham, 77 N. J. Eq. (7 Buch.) 232, and Doutney v. Lambie, 78 N. J. Eq. (8 Buch.) 277. The effect of the constructive notice is discussed in Smith v. Vreeland, 16 N. J. Eq. (1 C. E. Gr.) 198; Spielmann v. Kliest, 36 N. J. Eq. (9 Stew.) 199; Jennings v. Dixey, 54 N. J. Eq. (9 Stew.) 490; Condit v. Bigalow, 64 N. J. Eq. (19 Dick.) 504; Roll v. Rea, 50 N. J. Law (21 Vr.) 264; Schwoebel v. Storrie, 76 N. J. Eq. (6 Buch.) 466. I am therefore driven to the conclusion that the record title contains a notice to any 'purchaser that the title to 'the land in question might become subject to litigation to which he could be made a party on the ground of notice. It was held in Starkey v. Fox, 52 N. J. Eq. (7 Dick.) 758, and afterwards affirmed by the court of errors and appeals, that a court of equity would presume, after the lapse of a long period of time, that the trustee had accounted to the beneficiaries, and that all claims against him were barred by long delay, but that case is not authority for the position taken by the complainant here. In this ease it appears that Thomas Kelson held the title in his fiduciary capacity until 1906, and that his breach of trust, if breach of trust it was, began at the time when he caused the land to be conveyed to himself. This is but eight years ago, and it could hardly be said that sufficient time had elapsed to bar claims under’ the authority of Starkey v. Fox, and so that case is differentiated from this, an.d still leaves the matter in such doubt as that the court ought not to force the title on the defendant. Lot B is in a different class. There the objection is to a tax title outstanding in the name of a third person. Ho enfay has been made under it within twenty years last past, so that the common law limitation has run against it. The title therefore to lot B cannot be deemed doubtful. Beatty v. Lewis, 68 Atl. Rep. 95.

Although the title to two of the lots is unobjectionable, the court cannot compel the defendant to accept a conveyance of them. He bargained for the three lots by one contract and at an inclusive price, and he cannot be driven to take a part only; he has the right to all or none.

I will advise a decree in accordance with these views.


author: Gummere, Chief-Justice.

text:
    The Vineland Grape Juice Company, appellant, v. D. Harry Chandler et al., respondents.
    [Argued March 11th, 1912.
    Decided November 18th, 1912.]
    1. In a suit by a corporation against its stockholders alleging that certain shares of its stock were issued to them fraudulently and without consideration, except as to two per cent, of its par value, and praying that said stockholders be decreed liable to pay and make good to the corporation all loss sustained by it in consequence of the issuing of such stock, and that the same be surrendered for cancellation, evidence examined, and Held, that such allegation was not supported by the proofs.
    2. Whether corporate stock may be legally issued by a corporation in anticipation of work and labor afterward to be performed, or services afterward to be rendered, is, at least doubtful; but conceding that the law does not permit- this, nevertheless when it is thus issued, and • the work and labor are subsequently performed, or the services rendered, and they are equal in value to the par value of the stock which has been issued in prepayment therefor, it does not lie in the mouth of the corporation to attack the transaction in a court of equity, without at the same time tendering itself ready .to pay the parties to whom the stock was issued, or their assigns, the full value of the work done or services rendered for its benefit.
    3. The bill of complaint in this suit not having made such tender was properly dismissed.
    On appeal from a decree of the court of chancery advised by Vice-Oh ancel lor Learning.

      Mr. Harry S. Alvord, for the appellant.

      Mr. Lewis Starr, for the respondents.
    The opinion of the court was delivered by
   Gummere, Chief-Justice.

The bill in this case was filed March 30th, 1910. It alleges that the defendants, D. Harry Chandler and Frank H. Walls, together with Edward M. Wallington, Lewis W. Gould and Challes H. Anderson, organized the complainant corporation in the year 1897, for the purpose of manufacturing unfermented wine, or grape juice; that these gentlemen were the original stockholders and directors of the corporation; that they each originally subscribed and paid for twenty shares of the stock of the corporation, the par value of which was $10 per share; that shortly after their election as directors they secretly and fraudulently issued to themselves nine hundred shares of the treasury stock of the corporation (one hundred and eighty shares to each) for two per cent, of the par value of the stock; and that no further payment has at any time since been made upon it; that Gould, Anderson and Wallington are dead, and that their stock has passed into the hands of other holders who .took it with notice of the illegality of its issue; and that Chandler and Walls have .each of them assigned their stock to parties who took it with the same notice. On these alleged facts the prayer of the bill is that Chandler and Walls, and the executors of Anderson and Wallington he decreed to be jointly and severally liable to pay and make good to the corporation -all loss and damage sustained by it in consequence of the issuing of the said nine hundred shares of stock; and that the present holders thereof.be decreed to surrender it for cancellation.

Upon final hearing a decree dismissing the bill was advised by the vice-chancellor for the reason that the allegation that the nine hundred shares of stock were issued fraudulently and without consideration, except as to two per cent, of its value, was not supported by the proofs; and for the further reason that regardless of the meritorious question involved, the right to maintain the suit was barred by tlie supplement to the Corporation act of April 8th, 1903 (P. L. 1903 p. 362), which prohibits any action, either at law or in equity, from being brought against any officer or director of a corporation to recover any bonus, profit or reward of any kind secretly made out of any transaction with the corporation, and without disclosure of the fact, unless such action be brought within four years after the transaction has taken place.

We doubt the applicability of the statute (which was repealed in 1.907) to such a state of facts as that disclosed by the pleadings and proofs in this case; but we are of opinion that the det cree should be affirmed for the first of the reasons which led the vice-chancellor to the conclusion reached by him. At the time of the issuing of the stock to the five gentlemen named in the bill the corporation had been in existence only for a few weeks, and they were its only stockholders. It was their purpose to devote so much of their time and energy as might be necessary for the successful building up and carrying on of the business for which the corporation was organized, without any immediate compensation being paid to them out of its assets or earnings, but, nevertheless, not gratuitously. With this purpose in mind they consulted counsel, and, being a.dvised that corporate stock might he issued and paid for for services rendered to and work done for the corporation, they acted upon this advice, and, honestly believing that they had a right to do so, issued the stock to themselves in anticipation of rendering to the corporation ■services, and of doing 'work for it, without any other compensation, until the value of such services and work should equal the unpaid ninety-eight per cent, of the par value of the stock. So successful were they in the building up of the business of the corporation, and the management of its affairs, that in the year 1901, five years after its organization, it was earning and paying a dividend of six per cent, on its capital stock, which had by that time been increased to over four thousand shares, and up to, and even later than that date, they gave their time and services to the business without pay, excepting Mr. Gould, who had died in 1899. No attempt was made to show, either by the complainant or the defendant, just what was the value of these services; but $1,800 for the three years of work done by Gould, and the like sum for the five years during which each of the others served the company, can hardly be claimed to be an overpayment to either-of them. Unless it was, it follows that the stock has, in fact, been fully paid for, although such payment' was not made at the time oí its issue. It is settled in this state that stock may lie issued in payment for work and labor done. Wetherbee v. Baker, 35 N. J. Eq. (8 Stew.) 501, 512, and cases cited. Whether it may be legally issued in anticipation of work and labor afterward to be performed, or services afterward to be rendered, is, at least, doubtful; but, conceding that the law does not permit, nevertheless, when it is issued, and the work and labor are subsequently performed, or the services rendered, and they are equal in value to the par of the stock which has been issued in prepayment therefor, it does not lie in the mouth of the corporation to attack the transaction in a court of equity, without at the- same time tendering itself ready to pay to the parties to whom the stock was issued, or to their assigns, the full value of the work done or services rendered for its benefit. No such tender having been made by the bill in the present case, it was properly dismissed.

The decree under review will lie affirmed.

For affirmance—The Gitiep-Jtjstioe, Garrison", Swayze, Trexchard, Bergen", Yoorhees, Mixturn, Kalisci-i, Bogert, Vredexburgh, Coxgdox, Whyte, Tri-iacy—13.

For reverml—None,


text:
    Johanna A. L. Kellers, appellant, v. Frederick T. Kellers et al., respondents.
    [Argued March 18th, 1912.
    Decided November 19th, 1912.]
    The rule of construction promulgated by this court in Kent v. Armstrong, 6 K. J. Eq. (2 Holst.) 687, and reiterated in Gantine v. Brown, 46 y. J. Law (17 Tr.) 599, is the settled law of this state.
    On appeal from a decree advised by Vice-Chancellor Garrison, whose opinion is reported in 79 N. J. Eq. (9 Buch.) 412.

      Mr. John F. Gough, for the appellant.

      Mr. Merritt Jjane, for the respondents.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The bill in this case was filed under the act to cpiiet title to lands (Comp. Stat. p. 5399); and the rights of the parties turn upon the true construction of the following paragraphs con-famed in the will of Frederick K-Kellers, deceased, who was the husband of the complainant and the father of the defendants:

“I give, devise and bequeath to my beloved wife Johannah A. L. Kellers my entire estate both real and personal of whatsoever the same may •consist and wheresoever situate, to her, her heirs and assigns forever, if she be living at the time of my decease. In case my said wife should •die before my decease it is my will, and I direct, that my estate be •divided among my children * * * each of my daughters to receive two portions, or shares, to each of my sons one share, and to them and their assigns forever.”
“Should my said wife acquire my estate as aforesaid she may dispose ■of my estate by will as slie sees fit, should she however die without making a will, then this will shall operate and my estate be divided' between by children as hereinbefore provided.”

The complainant’s contention is that by this devise she took an absolute estate in the lands of her husband, notwithstanding the limitation over contained in it. The defendants, on the other hand, contend that by the proper construction of the will their mother was given a life estate in the property with a power to dispose of it by will, and not otherwise; and that in default of her making such disposition of it, it will pass to them under their father’s will as absolute owners thereof.

The learned vice-chancellor held that the complainant was not seized in fee-simple of the property devised by testator’s will, but that she had the right to enjoy the rents, issues and profits thereof during her natural life, and the furthér right to dispose thereof by a. last will and testament, but in no other way; and that the defendants, the children of the testator, were entitled, in the event of the complainant dying without leaving a last will and testament, to have the property pass to them as tenants in common, two shares to each of the daughters, and one share to each of the sons.

We concur in the result reached by the court below. The devise, which it was called upon to construe, so far as its legal effect is concerned, differs in no material respect from that which was before this court in the early case of Kent v. Armstrong, 6 N. J. Eq. (2 Halst.) 637. It was held in that ease that the primary devisee took a life.estate only, with a power of testamentary disposition, and that in the event of her dying intestate the executory devise over became operative. Thirty-five years later we again had before us in the case of Cantine v. Brown, 46 N. J. Law (17 Vr.) 599, the question of the construction of a devise similar to that under scrutiny in Kent v. Armstrong, and declared that the decision in the earlier case must be regarded as the law of construction in this state on such devises. All that the court of chancery, therefore, was required to do in its consideration of this case, was to ascertain whether the dévise in the present case could be fairly differentiated from that contained in the will which was the subject'of litigation in Kent r. Armstrong, and, if it could not be, then to apply the rule of constnietion promulgated in that case.

The decree under review will be affirmed.

For affirmance—The Chief-Justice, Garrison, Swayze, Trenohard, Bergen, Voorhees, Mintuen, Kalisoh, Bogurt,: Vredenburgh, Congdon, White, Treacy—13.

For reversal—None.


author: GUMMERE, CHIEF-JUSTICE.

text:
    The Vulcan Detinning Company, appellant, v. The American Can Company, respondent.
    [Argued March 14th, 1912.
    Decided November 18th, 1912.]
    1. When, in a suit to restrain the use of a secret process, ,the complainant also seeks an accounting of the profits made by the defendant, the former elects to treat the latter as a <¡r«asi-trustee, rather than as-a wrong-doer who should be compelled to answer in damages for his wrongful acts.
    2. The proceeding for such an accounting is one taken for the sole purpose of ascertaining what, in fact, was the net profit made by the-defendant in the conduct of the business during the period of the accounting.
    3. In an account so taken the defendant is entitled to be credited with-all expenditures made by it in the carrying on of the business, and for-the benefit of the business, all moneys paid for repairs to plant and machinery, all moneys paid for taxes thereon. It also includes depreciation in the value of the plant and machinery, notwithstanding the [act that suck depreciation -is abnormal because the plant .can no longer-be used by the defendant for the carrying on of the business for which it was originally designed, and cannot be adapted to other legitimate-uses without the expenditure of large sums of money.
    4. In such an accounting the complainant is entitled to interest on the-net profits made by the defendant in its business, and the account should be stated with annual rests, and interest on the annual net profits-shown should be allowed to the complainant.
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Howell.

      Mr. Robert H. McCarter and Mr. Henry Woilman and Mr. Edward 8. Seidman (of the New York bar), for tlie detinning company.

      ■Mr. Rickard V. Linddbury and Mr. Thomas Thacker, Mr. Philip G. Bartlett and Mr. Julitis F. Worfcum (of the New York bar), for tlie American Can Company.
   The opinion of the court was delivered hv

GUMMERE, CHIEF-JUSTICE.

A final decree having been made in this case restraining the defendant, the American Can Company, from continuing the use of a secret process of the complainant company for detinning tin scrap, and requiring it to account to the complainant for the profits which it had made through the use of that process, a reference was directed to Hon. William J. Magie, one of the masters of the court of chancery, for the purpose of stating such an ac- ■ count. Both parties attended before the master, and. an exhaustive examination, covering many days, was had of the expenditures made by the defendant in connection with the use of the complainant’s secret process, and of its income from that source. At the conclusion of this examination the learned master filed his report, stating the account between the parties, from which it appeared that the net profits derived by the defendant from the use of the secret process during the period covered by the accounting amounted to the sum of $677,352.18. Each party excepted to the account, and a hearing of .the exceptions was had before the vice-chancellor, who, after a consideration of each item of the account which was made the subject-matter of an exception by either party, confirmed the report of the master in toto, basing his approval of the disposition made by that officer of the items excepted to upon the reasons given by him, and set forth in his report. From the order confirming the master’s report both parties have appealed to this court, and each of them now contends that so far as the overruling of the exceptions to the report taken by it are concerned, the order is erroneous, but not otherwise. Our examination and consideration 'of the voluminous testimony taken before the master of the careful, painstaking and lucid report of that officer, and of the exhaustive briefs which have been furnished us by counsel for the respective parties, satisfies us that, except with regard to certain items which were disallowed by the master, the account was rightly stated between the parties, and the master’s report properly confirmed.

Taking up the consideration of those items. It is to be borne in mind that when, in a sitit to restrain the use of a secret process, the complainant also seeks an accounting of the profits made by the defendant, he elects to treat the latter as a quasir trustee, rather than as a wrong-doer who should be compelled to answer in damages for his wrongful acts. In other words, the ■ complainant, in effect, says: “The profits which would have been distributed among the stockholders of the American Can Companjr, had the user of the secret process by that company been a lawful one, belong to me, and I am entitled to have an account taken showing what those profits amount to, and an order that they be paid to me instead of to the stockholders of the can company.” But the fact that the complainant has elected to stand in the place of the stockholders of the defendant company as the party for whose benefit the account is to be stated, does not at all affect the principles upon which the statement'of the account is to be had. The proceeding is not one fox the punishment of a wrong-doer, not one for the imposition of a penalty upon a person who has been guilty of a fraud, not one fox the ascertainment of the sum which will compensate the complainant for the loss suffered b}' it from the wrongful use of the secret process by the defendant, but one taken for the sole purpose of ascertaining what; in fact, was the net profit made by the defendant company in the conduct of the business during the period of the accounting. In an account so taken the defendant is entitled to be credited with all expenditures made by it in the carrying on of the business, and for the benefit of the business; and this includes not only the items allowed bjr the master, but also the following items disallowed by him, viz., all moneys paid for repairs to plant and machinery, all moneys paid for insurance thereon, and all moneys paid for taxes thereon. It also includes - depre- ■ eiation in the value of the plant and machinery, notwithstanding the fact that such dejoreciation is abnormal because the plant can .no longer be used by the defendant for the carrying on of the business for which it was originally designed, and cannot be ■ adapted to other and legitimate uses without the expenditure of 'large sums of moneys. Such depreciation, no matter what causes it, decreases the profits made in the business, and, as we have already said, the sole matter to be ascertained is what were the • actual profits made ? In determining this matter it is immaterial what the conditions were which operated to increase or decrease them.

• Because of the refusal to allow a credit of these items to the •defendant in its accounting, the order confirming the master’s report must be reversed. If the parties can agree as to how much of the expenditures for repairs, insurance and taxes were made during the period covered by the accounting, and how much of the depreciation of the plant, and so forth, is attributable to the same period, the order may be modified by allowing credit to the ■ defendant for the sums so agreed upon; otherwise the case must be ‘ sent back to the master for the ascertainment of these • accounts.

In the accounting before the master the complainant claimed ■that it was entitled to interest on the net profits made bjr the defendant in its business, and this claim was rejected by the master, • and’his action in this regard confirmed by the court below. We ■think this claim should have been allowed. The defendant, as ■we have already stated, occupies the position of a gmsi-trustee, • carrying on the business for the benefit of the complainant. Normally, a trustee conducting a business for the benefit of a cestui que trust, is bound to account for and pay over to the latter, at -reasonable intervals, the profits made by him, and if he retains 'the profits after such payment should have been made, he is •chargeable with interest upon the sums so retained. Instead of ■treating the defendant as wrong-doer, the complainant elected (as it had a right to do) to hold it as a trustee carrying on the 'business for its benefit, and it is entitled to have the ordinary -rules governing in an accounting between trustee and cestui que drust applied to the defendant. The account should be stated with animal rests, and interest on the annual net profits shown allowed to the complainant.

If the parties can agree upon the amount of interest to which the complainant is entitled under the rule stated, the order will be modified in accordance with such agreement; otherwise this matter also must be sent back to the master for ascertainment.

The order tinder review will be reversed and modified in accordance with the views herein expressed. -

Ho. 40—

For affirmance—Hone.

For reversal—The Chief-Justice, Garrison^ Sway-ze, Trenoi-iarr, Bergen, Minturn, Kalisch, Bogert, VredenBURGH, CONGDON, WHITE—11.

Ho. 41—

For affirmance—Hone. '

For reversal—The Chief-Justice, Garrison, Swayize, Trenoi-iard, Bergen, Minturn, Kalisch, Bogert, Vreden-BURGI-I, CONGDON, WHITE—11.


text:
    Harry Dranow, respondent, v. Cassie Sherry et al., appellants.
    [Argued June 26th, 1912.
    Decided October 1st, 1912.]
    Where there is a bequest to one person, and, in ease of his death, to another, the gift over will be construed to take effect only in the event of the death of the first legatee prior to the period of distribution, unless a contrary intention appeal's in the will.

      On appeal from an order of the court of chancery made by Chancellor Pitney.

      Mr. John Bentley, for the appellants.

      Mr. Charles B. Bradley, for the respondent.
   The opinion of the court was delivered by

Gummere, Chief-Justice.

The complainant by bis bill in this cause seeks to have a judgment, which he recovered against the defendant Cassie Sherry, decreed to be a lien upon certain lands which stand in her name as the guardian of Joseph Gerard Sherry, now deceased.

The rights of the parties to the litigation depend upon the true construction of the will of Owen Sherry, who died in November, 1907, and who was the father of Joseph Gerard Sherry.

The pertinent parts of the will, are as follows:

“II. I give, devise and bequeath to my son, Joseph Gerard Sherry, and to his heirs and assigns forever, any and all property real or personal which I now possess, or which I may become entitled to.
“III. That the income thereof shall be devoted to the support and mainténance of the said Joseph Gerard Sherry, and if the income shall not be sufficient to support him, then so much of the principal shall he used as may be necessary for his support.
“IV. That in the event of the death of my said son Joseph Gerard Sherry I give, devise and bequeath to Cassie Sherry, and to her heirs and assigns forever, all property real or personal which I may be possessed of at the time of my death.”
“VI. I hereby appoint my executrix Cassie Sherry hereinbefore named guardian of my said son Joseph Gerard Sherry.”

The land upon which the complainant seeks to have his judgment impressed as a lien was purchased by the defendant Cassie Sherry, during the lifetime of her ward, Joseph Gerard Sherry, with funds out of the personal estate of the testator. Shortly after the investment was made Joseph Gerard Sherry, who was an infant only three years of age, died; and the question for determination is whether the funds which are now .represented by the lands in controversy are a part of his estate, or whether, upon his death, they passed under item IY. of the testator’s will to the defendant Cassie Sherry.

By the use of the words “in the event of the death of my said son,” appearing in paragraph IV. of the will, the testator applied terms of contingency to an event of all others the most certain and inevitable ; and to satisfy them it is necessary -to connect the son’s death with some occurrence in association with which it is contingent.

When the occurrence which the testator has in mind, in using language like that quoted, is not specified in the will, and the bequest is immediate (i. e., in possession), the words used can only refer to the contingency of the death of the first legatee happening during the lifetime of the testator; and so, in construing bequests of this character, it has become a settled rule in the law of wills that the first legatee takes absolutely if he survives the testator, and the gift over is defeated, Jarm. Wills (6th Eng. ed.) ch. 56 § 1; Hawk. Wills 254.

Counsel for the appellants’ while conceding the rule to be-as stated, contends that it is not applicable to the present ease because, as he claims, it appears from the context of the will that it was the purpose of the testator that his estate should not become absolute in his son until the latter-should reach the age of twenty-one, and that the contingency which he had in mind in framing the fourth paragraph of his will was the death of his son before reaching that age. This contention is based on the language of the third paragraph of the will, which authorizes the expenditure of income, and so much as may be necessary of the principal, for the support and maintenance of the son. But to give to this provision the meaning claimed for it is not only to nullify the absolute gift to the son contained in the second paragraph of the will, but also to radically change the provision of the legacy to Cassie, in the event of the son’s death, from a gift of all the testator’s property of which he might be possessed at the time of his death, to so much thereof as should not have been used for the maintenance and support of the son.

The plain and only purpose of the third paragraph of the will was, as it seems to as, to leave the guardian of the son free to use her own judgment in the matter of the sums to be expended for his maintenance and support during his minority, even to the extent of the using of the corpus for that purpose if the guardian should deem it advisable.

It follows, therefore, that the contention of the appellant is not justified by the1 language of the testator; that the legacy to Joseph Gerard Sherry became absolute upon the death of his father, and that the defendant Cassie Sherry has no interest in the testator’s estate.

The order appealed from will be affirmed.

For affirmance—The Chancellor, Chiee-Justice, Garrison, SwÁyze, Trenchard, Parker, Bergen, Voorhees, Min-turn, Kalisch, Bogert, Vredenbtjrgh, Vroom, Congdon, Treacy—15.

For reversal—None.


author: Swayze, J.

text:
    Ida A. Peterson, appellant, v. Cyrus D. Reid et al., respondents.
    [Argued December 5th, 1911.
    Re-argued June 21st, 1912.
    Decided November 18th, 1912.]
    1, A mortgage recited that it was given to secure part of the purchase-money and the conditions in the deed; by the deed the vendor-mortgagee bad covenanted to fill the land conveyed; after a partial breach but before the time for full performance bad arrived, the mortgage, which then had three years to run, was assigned to complainant; after the time for full performance and breach of the covenant and before the mortgage was due, the vendor and the owner of the equity of redemption -who claimed through two mesne conveyances, agreed to a waiver of damages for the breach and an extension of the time for'performance; the mesne conveyances both recited that the land was conveyed .subject to a mortgage amounting to $10,000, meaning thereby the complainant’s mortgage.—Held, (1) that the complainant was not bound by the covenant; (2) that the mortgage was not subject to a deduction for damages caused by breach of the covenant.
    2. Where land is conveyed subject to a mortgage and the circumstances show that only the definite and ascertained equity above the mortgage is meant to be conveyed, the grantee cannot claim a deduction from the mortgage by reason of an antecedent equity in favor of his grantor.
    On appeal from a decree of the court of chancery advised by Vice-Chancellor Howell.
    Rill to foreclose á purchase-money mortgage by the assignee of the mortgagee against subsequent owners claiming under the mortgagor. The defence is that the mortgagee covenanted with the mortgagor to fill in the land and failed to do so. The vice-chancellor sustained this defence. The land was conveyed by the Carteret Realty Company to Cyrus D. Reid by deed dated May 5th, 1905. The realty company covenanted that it would on or before the ensuing first day of June fill in a certain portion of the land and within six months thereafter fill the whole premises to a height of three feet above the surface. Reid executed a mortgage of even date to the Carteret Realty Company for $10,-365, upon which $10,000 remains unpaid. The mortgage was payable May 5th, 1908, and contained the usual clause making it due upon default in payment of interest. It recited that it was given to secure part of the purchase price “and the conditions named in said deed.” No deed is referred to in the mortgage, but there is no donbt the deed above recited is meant. Reid conveyed to Erank T. Morrill by deed dated May 6th, 1905, recorded October 16th, 1905; and Morrill conveyed to Prank T. Morrill & Company, a corporation, by deed dated October 11th, 1905, recorded October 16th, 1905. Meantime the mortgage had been assigned by the realty company and reassigned to it, and then assigned to the complainant by assignment dated July 13th, 1905, recorded July 21st, 1905. Reid, in his deed to Morrill, covenanted to fill, in the same language as the realty company had covenanted with him; in fact the covenant seems to have been copied from the earlier deed. Morrill, in his deed, covenanted with Prank T. Morrill & Company to fill the whole premises to a height of three feet above the surface on or before December ■ 1st, 1905, and he assigned to the corporation any claim or cause of action he might have against Reid by reason of the non-fulfillment of Reid’s contract to fill a portion of the premises on or before June 1st. Both Reid and Morrill recited in their deeds that the property was subject to a mortgage amounting to $10,000 at five per cent, interest. It is not questioned that this refers to the complainant’s mortgage. The land was not filled at the time fixed. The first interest paj'ment became due November 5th, 1905, hut was not paid. At that time the only default in performance of the covenant to fill was for the portion that was to be filled by June 1st. The defendant corporation waited until December 6th, and then paid the interest, but called the complainant’s attention to the breach of the covenant and gave notice that it did not waive any claim for damages which it had against tire mortgagee and tire complainant as assignee. It called attention to the clause in the mortgage reciting that it was given to secure the conditions in the deed, and to the covenant therein. It added:
    “By virtue of the aforesaid clause in the mortgage you are held to have notice of this condition. I now expect that the filling will be put in very shortly, and that this will cause us no further trouble, but I wish you to know that should this not be done, a sufficient amount to pay for doing it ourselves will be deducted from your mortgage or interest thereof.”
    The defendant- corporation had been in correspondence since November 11th, with Savage, an officer of the realty company, with reference to the failure to fill. Thereafter, on'June 26th., 1906, a mitten agreement was made between Frank T. Morrill & Company and the Carteret Realty Company, which recited the covenant in the deed of May 5th, 1905, and the failure of the realty company to perform. Frank T. Morrill '& Company agreed that upon condition and in consideration of the performance of this agreement, it would waive all damages which it had suffered or might suffer up to October 1st, 1906, by reason of the failure of the realty company to perform its agreement with Reid. The realty company agreed to fill the whole tract on or before October 1st, 1906, and to give Frank T. Morrill & Company the use of its dock to February 1st, 1907, without charge and to make no charge for its previous use. The use of the dock was subject to a sale by the realty company after October 1st, 1906. On-September 10th, 1907, the realty company notified the Morrill company that prospective purchasers of adjoining property would require the dock within two weeks. Interest on the mortgage was paid up to that time, although not promptly. Erank T. Morrill & Company offered the failure of the realty company to fill as its excuse for failure to- pay promptly, and efforts to get that company to perform its covenant seem to have been constant but met with only partial success. Erank T. Morrill & Company defaulted in the interest due November 5th, 1907, and the bill was filed. The defendants answered and filed cross-bills, which upon demurrer were sustained. 76 N. J. Eq. (6 Buch.) 877. Upon final hearing there was a failure to prove the charge of the cross-bills that the complainant was a mere volunteer without interest acting for the benefit of the realty company. As far as the c-ase shows, she paid the full amount of the mortgage.

      Mr. Robert II. McCarter and Mr. Francis V. Dobbins (Mr. Arthur F. Egner, on the brief), for the appellant.

      Mr. Thomas G. Haight (Messrs. Tennant & Haight), for the respondents.
   The opinion of the court was delivered by

Swayze, J.

The defendants claim the right to have deducted from the amount of a purchase-money mortgage unliquidated damages for breach of an executory covenant. The covenant was made not by the present holder of the mortgage, but by her assignor, and not with the present owner of the equity of redemption, but with a predecessor, in title. There is no privity of contract. The de- • fendants seem to rest their claim either on the theory that the present holder of the mortgage is bound by a covenant made by her assignor, or the theory that she acquired the mortgage subject to an equity of the defendants to have the deduction.

(1) We think the first theory is untenable. Even if the case were one where the burden of a covenant could run with the land, the complainants interest is, in equity, a mere security for her debt. The suggestion that the burden of a covenant made by a mortgagee with the mortgagor runs with the mortgage and binds the assignee is novel. Plain language would be necessary, l'n the present case, the mortgage merely recites that it is given to secare the conditions in the deed. It does not purport to bind assignees. The language is inapt to impose an obligation upon the mortgagee in favor of the mortgagor, since by its terms it “secures” the conditions by a conveyance of the mbrtgagor’s land to the mortgagee. The complainant could not have been bound to perform the covenant, since she had no right of entry on the land for the purpose, and the owners persistently treated the realty company as the party bound. The case differs from cases of restrictive covenants where equity charges upon subsequent owners the duty to observe the restrictions. The covenant in this case involves labor and expenditure as well as the right of entry on the land. The burden of such covenants does not run with the land even in equity. Haywood v. Brunswick Building Society, 8 Q. B. D. 403; 51 L. J. Q. B. 73; Austerberry v. Corporation of Oldham, 29 Ch. Div. 750; 55 L. J. Ch. 633, cases which were cited with approval in De Gray v. Monmouth Beach Club House Co., 50 N. J. Eq. (5 Dick.) 329 (affirmed on the vice-chancellor’s opinion by this court, see 67 N. J. Eq. (1 Robb.) 619). Even if we disregard the curious use of language which makes the mortgagor give a mortgage on his land to secure performance of a covenant for his benefit, and calls the covenant a condition, and if we assume that the intent was to secure performance of the covenant to fill contained in the realty company’s deed to Beid,’the defence is not helped. That covenant was a covenant of the Carteret Bealtv Company to fill on or before December 1st, 1905. It was subsequently abandoned by mutual agreement between the realty company and Erank T. Morrill & Company, the agreement of June 26th, 1906, substituted therefor, and all damages were waived. By means of this new agreement, Erank T. Morrill & .Company secured the use of the dock, and this consideration probably led them to abandon the original covenant. The covenant in the deed was thereby -abrogated by novation, and neither the realty company nor Mrs. Peterson are liable thereon.

(2) The defence must rest on the theory that the complainant took the assignment subject to an equity in favor of the mortgagor against the original mortgagee, the complainant’s assignor. We assume that she took with notice of the existing facts. One reason that courts allow a deduction from the amount of a purchase-money mortgage aside from cases where fraud justifies rescission and cancellation, is that thereby circuity of action is avoided. Shannon v. Marselis, 1 N. J. Eq. (Saxt.) 413. Before such a defence can prevail there must be a right of action in the mortgagor and damages must have been sustained. This right of action depends, as counsel for the defendants argue, upon a failure of consideration, and it! is because the abatement from the face of the mortgage, in a case like the present, depends upon a failure of the consideration therefor, that the right is limited to purchase-money mortgages, where there are covenants against encumbrances, of warranty, or the like, or cases of fraud or mistake.

An examination of the facts of the present case shows that the only failure of consideration alleged is the breach of the executory covenant. That, however, is not, strictly speaking, a failure of consideration for the mortgage,- since it was the promise itself and rot the performance of that promise that constituted the consideration. The mortgagor might have stipulated that the mortgage should become due only upon the performance of the agreement by filling the land; he was content to rely upon the mere promise to fill. The mortgage was valid for the full amount on the day it was given because the whole consideration—the-land and the promise to fill—had passed. When the contract is already executed on one side, as it was'in this case by giving the mortgage, and performance of a promise by the other party is to take place in the future, it necessarily is the promise and not the performance thereof that constitute the consideration. There is no equity to a deduction from the face of the mortgage until the mortgagor has a right of action and has been in fact damaged, since it would-be manifestly unjust to make a deduction where there might eventually be no loss. Even where there were paramount liens for taxes at the time of the deed and mortgage, but no covenant against encumbrances, we held that the deduction from the mortgage claimed on account of the tax liens could not be permitted by reason of the covenants for quiet enjoyment and general warranty. There had been no eviction; there was no right of action and no damage. Baudendistel v. Zabriskie’s Executors, 50 N. J. Eq. (5 Dick.) 453. The argument is stronger in a case like the present, where at the time of the conveyance there was a complete consideration in accordance with the intent of the parties, and the damages are claimed for a subsequent breach of an executory covenant, which could not have been even anticipated at the time. The learned vice-chancellor, however, was in error even if we could hold that the subsequent breach amounted to a failure of consideration. The only equity against the complainant is the equity that existed when the mortgage was assigned to her on July 13th, 1905. At that time there had been at most only a partial breach by failure to do the work required to be clone by June 1st; for the subsequent breach the defendant had a right of action against- the Carteret Realty Company, but ibis could not affect the complainant. She was not • hound to perform the covenant of the Carteret .Realty Company for reasons already stated. The extent to which the defendants could claim an equity as against an assignee of the mortgage, if they could claim an}', would he the amount of damages for the partial breach prior to the assignment. Even that cannot be allowed to 'the present owner of the equity, Prank T. Morrill & • Company. The covenant to fill was not made with it, but with Reid. • If we concede that the benefit of the covenant ran with the land, it clid not pass unless such was the intent of the parties effectuated by the conveyance. Whether the benefit of the covenant has passed to Prank T. Morrill & Company depends on what Reid conveyed to Morrill and Morrill .to the company. Each deed conveyed an equity of redemption, but the extent of that equity dépended on the amount to be paid on the mortgage. If Reid conveyed to Morrill no more than the equity beyond $10,-000, and the Morrill company were now allowed to redeem for less, they would obtain more than Reid conveyed, and thus would secure Reid’s property without paying for it. It is for this reason that it is held that where land is conveyed srxbject to a certain mortgage the grantee cannot ask to have the mortgage abated. He does not stand in the shoes of the mortgagor; the latter owned the whole estate, the. grantee only an eqxxity of redenxption. The mortgagor may convey his whole equity, or he may convey only a definite equity, and xvaive his defence to the mortgage in favor of the mortgagee. This was the view of Chief-Justice Green, speaking for this court in Brolasky v. Miller, 9 N. J. Eq. (1 Stock.) 807 (at p. 813). In Warwick v. Dawes, 26 N. J. Eq. (11 C. E. Gr.) 548, 555, 556, Chief-Jxxstice4 Beasley rested his decision upon the injustice of alloxving a pui’cliaser to profit at the expense of the mortgagee, when the mortgagor, who, if anj'-one, was the injured party, ahaixdoned his right. In Hackensack Water Co. v. De Kay, 36 N. J. Eq. (9 Stew.) 548, Mr. Jxxstiee Depue said that the theory on which cases of this class are foxmded is that the mortgagor having elected to affirm the mortgage by selling the mortgaged premises subject thereto, the purchaser, 1))’ his contract as expressed in his deed, takes an equity of redenxption only, and therefore cannot dispxxte the validity of’ the mortgage, and thus obtain an interest in the land which the mongagor never intended to transfer to him. In Trusdell v. Dowden, 47 N. J. Eq. (2 Dick.) 896, Vice-Chancellor Yan Fleet, speaking of a case of a xisurious mortgage, says that the doctrine that the purchaser of the eqxxity of redemption, who takes title subject to such mortgage, cannot set up the defence of usury, , does not rest on the theory that the taint has as between the original parties been purged from the mortgage, but upon the foundation that the purchaser by taking title subject to the mortgage axxd retaining oxxt of the price he agreed to pay sufficient money to pay the mortgage, places himself in a position where he cannot allege usury without attempting to keep back part of the money which he agreed to pay for the. mortgaged lands. Having retained enough of the purchase-money to pay the mortgage, under a promise that he would apply the money to the payment of the mortgage, lie woxxld, if he could successfully make the defence, defraud both bis grantor and the mortgagee. The rule has recently been reasserted aixcl applied by this court -to a case '■ where land was bought of a receiver of an insolvent corporation subject to the mortgage in suit, and one of the defences was that the mortgage was ultra, vires, and therefore invalid and void. Camden Safe Deposit, &c., Co. v. Citizens Ice, &c., Co., 71 N. J. Eq. (1 Buch.) 221. These cases present two-theories, one that of “unjust enrichment” (to use the nomenclature now coming into vogue), on which the action for money had and received and what are now called “</wasi-contracts,” rest; the other that the intent of the parties was to convey only a definite and ascertained equity of redemption, the right to redeem by paying the specified amount of the mortgage. The theories are not inconsistent. Where only Ihe definite and ascertained equity is conveyed, it is an almost irresistible conclusion that allowance has been made by deducting the amount of the mortgage from the value of the land if unencumbered, and quite irresistible that if the'grantee of the equity is allowed to claim a deduction from the amount of the mortgage he gets something which he never bought, and was never conveyed to him. Where the amount of the mortgage is not deducted from the purchase-money, and the grantee does not purchase subject to the mortgage, the principle is not applicable (Van Winkle v. Earl, 26 N. J. Eq. (11 C. E. Gr.) 242), and so it is where the reference to the mortgage is only by way of excepting it from the operation of the covenants for’ title, or the conveyance is for part only of the mortgaged premises so that the presumption arises that the land retained is to answer for the whole or part of the debt. Magie v. Reynolds, 51 N. J. Eq. (6 Dick.) 113. An examination of the facts in the present case convinces us that the intent of the parties was to conve.y only the definite and ascei'tained equity of redemption that would remain after paying $10,000 on the mortgage. The equity in the whole mortgaged premises was conveyed. The language of Reid’s deed to Morrill does not evince merely an intent to except the mortgage from the covenants of title. It is “subject, however, to a mortgage amounting to the sum of ten thousand dollars,” and the language in Morrill’s deed to the Morrill company is the same with the omission of the words “the sum of.” The object of stating the amount could have been only to fix and determine the extent of- the equity intended to be conveyed. If the object had been to except the mortgage from the operation of the covenants for title, it-would have been quite unnecessary to mention the-amount. Moreover, when the deed from Morrill to the Morrill company was made, there had already been a partial breach of' the covenant to fill, and if the present contention of the company is sustained, the mortgage did not then amount to $10,000. This fact was known to the grantor, and the grantee is chargeable with notice; the covenant to fill was in a deed in its chain of title, and the fact that the filling liad not been done was visible-upon the ground. Under these circumstances the deed was'made and accepted subject to a $10,000 mortgage; the necessary inference is that knowing of the breach of the covenant to fill, the-grantor chose to convey and the grantee to accept what equity remained above the amount -fixed. This view is confirmed by the-fact that in Morrill’s deed to the company, made after the partial breach on June 1st, he assigns his claim against Eeid by-reason of the non-fulfillment of Eeid’s contract. If the parties-had meant to convey to Erank T. Morrill & Company, a right toelaim a deduction as against Mrs. Peterson, it is inexplicable that the grantor assigned and the grantee accepted a claim against Eeid, mentioned no claim as against the mortgagee and at the same time acknowledged that Mrs. Peterson’s mortgage amounted to $10,000. That neither party to the last-mentioned deed supposed that more was conveyed than the definite and ascertained equity over $10,000, appears further from the fact that instead of' assigning the benefit of the original covenant of the Carteret * Eealty Company,, or any right of action against that company for the existing partial breach, Morrill entered in a personal covenant himself to fill in to the depth of three feet before the ensuing - December 1st. If that covenant had been merely collateral to the original covenant of the Carteret Eealty Company, he would not, in the immediately succeeding clause, have referred to the mortgage as amounting to $10,000, without reference to any equity to a reduction of - amount. The parties throughout treated the cove- - nant to fill as a personal covenant, not running with the land either by way of burden or benefit, and on each conveyance a new-personal covenant was made by grantor with grantee. The case-resembles Davis v. Clark, 33 N. J. Eq. (6 Stew.) 579, where it: was held that there could be no deduction from the mortgage because there was no privity of contract between the holder of the mortgage and the owner of the equity of redemption. The Carteret Realty Company was liable for breach of its original covenant, and there was a novation of1 its liability by the agreement of June 26th, 1906. By this agreement, Frank T. Morrill & Company waived all damages up to October 1st, 1906, in effect, extending the time for performance to that date, and the Carteret Realty Company agreed to 511 in by October 1st. During the period between June 26th and October 1st, even‘the Carteret Realty Company was not in default. If any equity ever had attached to the mortgage in Mrs. Peterson’s hands by reason of the partial default on June 1st, 1905, that must have ceased when the owner of the equity waived its claim for damages. The only' breach now existing for which Frank T. Morrill & Company can claim damages is the breach of the agreement of June 26th, 1906; Mrs. Peterson cannot be charged with any liability for that breach; she was not a party to the agreement, and had acquired her mortgage a year before the agreement was made.

For these reasons we think the decree below is erroneous and must be reversed. The record should be remitted and a decree of foreclosure entered. The complainant is entitled to costs in both courts.

For affirmance—E one.

For reversal—The Chief-Justice, Garrison, Swayze, Ber- • CBN, VOOBHEES, MlNTURN, KaLISCH, BoGERT, VrEDENBURGH, Congdost, White—11.


text:
    John B. Elmendorf et al., appellants, v. American Combustion Company et al., respondents.
    [Submitted July 8th, 1912.
    Decided November 18th, 1912.]
    The owner of a patent, a New Jersey corporation, licensed one of the defendants to manufacture the patented device; he assigned the license to a New York corporation; stockholders of the New Jersey corporation filed a bill to set aside the license as fraudulent; no notice was served upon the licensee or his assignee, the New York corporation, and neither was amenable to process of New .Jersey.—Held, that the subject-matter of the suit was the right claimed by the New York corporation and questioned by the complainants, and that this right had no situs in New Jersey which would sustain the bill as a proceeding in x-em.

    On appeal from an order of the court of chancery advised by Vice-Chancellor Howell.
    Bill for an injunction. The American Combustion Company owned certain patent rights and licensed the defendant Lucas to, manufacture the patented devices. Lucas assigned to the defendant the Anthony Company, a Hew York corporation. The charge of the bill is that the transaction was fraudulent to the injury of the stockholders of the American Combustion Company, who are the present complainants; that the American Combustion Company was substantially controlled by the defendants, and that the directors have refused to comply with the request of the complainants to institute actions to set aside the license. The American Combustion Company alone appeared. Ho notice was served upon the Anthony Company dr Lucas within this state and neither is amenable to our process. The vice-chancellor thereupon denied a-preliminary injunction.

      Messrs. Yrederiburgh, Wall & Carey, for the appellants.

      Mr. George IF. Flaacke and Mr. John 8. Parker (of the New York bar),, for the respondents.
   The opinion of the court was delivered by

Swayze, J.

The contention of the appellants is that the suit is a jn’oceed'ing in rew. They disclaim the idea that the license or even the letters patent are a res within this state and insist that the rights secured under the letters patent are the res over which the court "has jurisdiction. The owner, they argue, is the New Jersey ■■Company; since the license agreement did not transfer the owner- ■ ship of the patent, the situs is the domicile of the owner. This -argument, however, confuses the patent right with the right under the license, which is in derogation of the exclusive right -of the patentee and is in fact so much subtracted from that right. Tt is begging the- question to say that the license agreement did mot transfer the ownership of the patent; it transferred at any rate a right under the patent by way of license, and whether or mot that transfer is valid is the question to be decided. Jurisdiction to decide that question cannot be predicated upon the assumption of the very point in issue—the validity or invalidity of the license.

The subject-matter of ¿his suit is the right claimed by the Anthony Company and questioned by the complainant. Unless that subject-matter is within the jurisdiction of this court, the 'learned vice-chancellor was right in denying the injunction. A patent right is not a right to manufacture the patented article; . anyone may do that in the absence of the patent. The right is to prevent others from manufacturing. The effect of a license is •merely to permit the manufacture of what would otherwise be ■subject to restraint at the suit of the patentee. It is in effect an • agreement exempting the licensee from liability for infringement, • a privilege which he may set up in defence in an action against him for infringement by the owner of the patent. Assuming that •it has a situs in any proper sense of the word, that situs must be •at the domicile of the owner of the privilege who alone can avail ..himself of it and can have qo occasion to do so until he is sued for infringement.' The situs cannot he at the domicile of the owner of the patent for it is an interest adverse to his and comes into play only when he asserts an exclusive right under the patent. It might as well be argued that a right to manufacture the patented article iu England, when it is patented only in the United States, had a situs here and that the right of the English manufacturer could be determined in his absence by a suit against the American patentee.

The assumption that the right of the patentee has a situs is moreover unwarranted. The right is granted by the federal government and is as broad as its jurisdiction. It exists in California and Alaska as well as in New Jersey and has no situs in any particular state. Upon this subject the decisions of the federal courts must be followed. In Stevens v. Gladding, 17 How. 447, the court held in a copyright ease that there was nothing in any act of congress or in the nature of the rights themselves to give them locality anywhere so as to subject them to the process of courts having jurisdiction limited by the lines of states and districts. The same reasoning applies to patent rights, as the supreme court of Massachusetts held in Carver v. Peck, 131 Mass. 291. In Jewett v. Atwood Suspender Co., 100 Fed. Rep. 647, a judge of an insolvency court in Vermont had assigned a patent belonging to the insolvent debtor; the complainant claiming title under that assignment sued for infringement and the defendant pleaded want of title to the patent in the complainant. The court said: “Patents can be reached under the Bankrupt law because they axe wholly subject to the laws of the United States; they cannot he reached otherwise for debts except by proceedings which compel a personal assignment.” In Wilson v. Martin-Wilson Automatic Fire Alarm Co., 24 N. E. Rep. 784, the Massachusetts court sustained an assignment by a court officer of a patent belonging to a debtor under statutory proceedings for that -purpose, hut they rested .the power upon the personal jurisdiction of the debtor. The court said: “A patent right is not like a material substance. So far as it has location at all, it is within every part of the United States. But it has no such location anywhere that a particular state can say this property is within my jurisdiction, I will not allow any other state to deal with it, but I will control it by my own laws for the benefit of my own people.” In the recent case of P. H. & F. M. Roots Co. v. Decker, 127 N. W. Rep. 417, the Minnesota court had to deal with the validity of an assignment from the patentee to his wife, both of whom were residents of Missouri. The attempt of counsel was to sustain the jurisdiction by reason of the fact that a Minnesota corporation was manufacturing the patented article and paying a royalty for the privilege. The court said: “The validity of the transfer of the letters patent from Decker to his wife is therefore the first essential question to be determined in the action. The government grants to an inventor the exclusive privilege of manufacturing and selling a certain named article. It is an incorporeal right, franchise or privilege attached to the i person, protected by law as a property right, but having no situs 'separate from the individual who possesses it. This right may be transferred, in which case the assignee occupies the position of the patentee; hut the character of the privilege remains the same. It follows that before the court can deprive an individual of this privilege, it must have complete jurisdiction of him personally. Mo statute could eliminate this requisite; for to permit a court in the absence of jurisdiction over defendant, personally, .to determine his personal privileges, would not constitute due process, but would deprive one of property, without notice or hearing.” “An action to determine the ownership of letters patent is strictly in personam, jurisdiction to determine which must be obtained ’ , by personal service of process upon the defendant within the territorial limits of the court’s jurisdiction.” The case of Hildreth v. Thibodeau, 71 N. E. Rep. 111, is very similar to the case at bar. The title of the non-resident defendant to the letters patent was assailed as fraudulent; the jurisdiction of the Massachusetts court was sought to be sustained on the ground that the proceeding was in rem. The court, however, held: “To give jurisdiction over this patent it would be necessary to show that the title of Duff & Kitzmiller is fraudulent as against the plaintiff, or is subject to equities in his favor which give him a right to control the patent. Such proof is a condition precedent to the proper exercise by the court of any jurisdiction over the patent. To a suit to determine a question of this kind, the owners of record are necessary parties. Jurisdiction over them, which will authorize a trial of the question, must he obtained before a court can deal directly, with the. patent as property.-v

The utmost claim that can he made under these eases is that our courts having jurisdiction of the New Jersey corporation can determine as against it the title to the patent and compel its assignment; hut that is very different from determining in its favor the question of title without personal jurisdiction of the adverse claimant; the last two eases above cited are authority for the position that it cannot be done. Where there are adverse, claims to the title and the situs depends upon the fiction that movables follow the person, the very question to be determined is who is the owner-whose ownership draws to it the situs. If, in the present case, our courts have jurisdiction because one claimant of the patent right is domiciled here, the courts of New York would have jurisdiction if an adverse claimant was domiciled there. The existence of the claim does not determine the situs in any event; it can only be the rightfulness of the claim, and that rightiulness is the very point to be determined.

In Amparo Mining Co. v. Fidelity Trust Co., 75 N. J. Eq. (5 Buch.) 555, we held that so far as such intangible rights could, be said to have a situs, it must be where they could be effectually dealt with. The right to be dealt with in the present case is a right of defence and not a right of action. The defendant, the Anthony Company, would never need to bring a suit against the American Combustion Company upon the license. That license is of moment when the owner of the patent asserts a right to enjoin the licensee; but the right of injunction can only he effectually dealt with in a jurisdiction where the licensee is subject to process and the method of dealing effectively with the license is by plea in defence of the action and by replication thereto averring its invalidity. If the courts of the domicile of the owner of the patent have jurisdiction in the absence of personal service upon one licensee they have jurisdiction over all licensees, no matter how numerous, and thus by virtue of the same res, 'have jurisdiction over licensees claiming under entirely distinct rights. This cannot be.

We think the vice-chancellor was right in denying the injunclion. The order is affirmed, with costs. Tt is unnecessary to decide what decree may be made against the American Combustion Company since the injunction sought was against the nonresident defendants.

For affirmance—Tira Chancellor, Chief-Justice, Garrison, Swayze, Trenchard, .Bergen, Yooekees, Mynturn, KALrscir, Bogert, Yredenburgh, Congdon,- White, Treacy —14.

For reversal—None.


text:
    In re probate of will of Thomas W. Veazey.
    [Submitted June Term, 1912.
    Decided November 18th, 1912.]
    1. Proceedings for the probate of a will are not- a civil action but a judicial inquiry to ascertain whether the instrument before the court is the last will and testament of the deceased, and section 4 of the Evidence act (Comp. Stat. p. 2218) is inapplicable.
    2. One who acts as attorney and counsel of a testator in the execution of a will, may testify with reference thereto in a proceeding for probate thereof.
    The Camden orphans court admitted the will to probate for reasons stated by Judge Jolino, as follows:
    “Having determined to admit the above-named paper to pro- . bate it seems fitting that I should shortly make known my reasons for so doing.
    “On the lltli day of May, 1910, Elizabeth L. Shaw filed with the surrogate a caveat against admitting to probate any paper ■purporting to lie the last will and testament of Thomas W. Yeazey, deceased. The testimony of the three witnesses to the will, of the scrivener, and of an architect was taken. It is unnecessary to consider the testimony of this last witness as I conceive it to have no hearing upon the main issue, which is, was this will executed in conformity with the laws of this state ?

      “Before considering the testimony of the witnesses, it may be well to ascertain the law relating to the attestation clause in cases where the recollection of the witnesses is not exact as to the execution of the will.
    “In Allaire v. Allaire, 37 N. J. Law (8 Vr.) 325, 326; affirmed, 39 N. J. Law (10 Vr.) 113, it is held that the attestation clause is prima facie, evidence of all the facts stated in it, and if the attesting witnesses, when called, admit their signatures, but through defect in memory, or for any other reason, fail to testify to the due execution of the will, it may' be established on the presumption arising from the form of the attestation clause, unless there be affirmative evidence given to disprove its statements, and the court further on cites the language of Lord Lenzance in Wright v. Rogers, 1 L. R. P. & D. 678, practically to the same effect.
    “In Mundy v. Mundy, 15 N. J. Eq. (2 McCart.) 290, 293, Chancellor Green states the law to be that the attestation clause with the signatures of the witnesses is prima facie evidence of the facts stated in it. It may he overcome by witnesses' themselves, or by other witnesses, or by facts and circumstances irreconcilable with its verity. In Tappan v. Davidson, 27 N. J. Eq. (12 C. E. Gr.) 459, 462, the court said if it is doubtful on the evidence whether the will was not signed at the table, under such circumstances the presumption arising from the statement the attestation clause is not overcome. Ayres v. Ayres, 43 N. J. Eq. (16 Stew.) 569; Elkinton v. Brick, 44 N. J. Eq. (17 Stew.) 167; Turnure v. Turnare, 35 N. J. Eq. (8 Stew.) 440.

    “In McCurdy v. Neall, 42 N. J. Eq. (15 Stew.) 334, it was held that where the attestation clause is perfect the court must have c-lcar proof to warrant the conclusion that the will was not duty executed.
    “Other cases to the same purport are: Farley v. Farley, 50 N. J. Eq. (5 Dick.) 434, 439; Darnell v. Buzby, 50 N. J. Eq. (5 Dick.) 727; Stewart v. Stewart, 56 N. J. Eq. (11 Dick.) 765; Lacey v. Dobbs, 61 N. J. Eq. (16 Dick.) 583; Lacey v. Dobbs, 63 N. J. Eq. (18 Dick.) 327: Beggans Case, 68 N. J. Eq. (2 Robb.) 574.

      “The attestation clause in the case'sub judice is as follows:
    ‘Signed, sealed, published and declared by said Thomas W. Veazey, the testator above named, as and for his last will and testament in the presence of us who in his presence and in the presence of each other have hereunto subscribed our names as witnesses thereto.’
    “The signature of Thomas W. Veazey appears opposite a seal above this attestation clause, and the signatures of E. Fullerton Cook, J. W. England and Jacob S. Beetem, in the order named, appear thereunder. It is admitted that the will was taken into another room for Mr. Beetem’s signature, but that is immaterial if Cook and England executed it properly. Allaire v. Allaire, 37 N. J. Law (8 Vr.) 328.

    “The attestation clause cited above is perfect, and it follows that it is prima facie evidence of all the facts stated in it, not to be overcome by lapse of memory of the witnesses.
    “'Now, an examination of the testimony shows in Substance the following facts: England admits that the signature of J. V. England to the will is his; that he saw Mr. Veazey sign it; that Prof. Cook, Mr. Ye&zey, the attorney and Mr. Beetem were present; that it was in the college library; that he was passing through the library at noon, and was asked to sign it; and that he then signed as a witness; that he said it was a will and that he remained present until all the other witnesses signed their names.
    “Cook admits his signature; that he has no recollection of seeing Veazey sign; that he was passing through the library and Veazey asked him to sign or witness his will; that someone who was in the library was present, but that he can’t recall who it was; that he can’t say that it was England; that he does not remember seeing either England or Beetem sign their names; that he can’t say whether Veazey signed prior to him; that he has no recollection of the attestation clause being read over to him.
    “Beetem admits his signature, but is generally ignorant of what occurred. He said that if anyone had asked him if he signed Veazey’s will he would have said no; that he hasn’t the slightest recollection of it.
    “It will be noticed that there is nothing in the testimony of either of these witnesses to negative the facts stated in the attestation clause. The first two admit that they were asked to sign, a will; they all admit their signatures; England says they were a-11 present. Cook sai^s that someone connected with the college was present. Thej' do not say that they didn't execute the will legally; there is a defect, a lapse of memory; they do not remember; there is nothing inherent in the case to lead to the belief that the attestation danse does not correctly state the facts; there are no facts shown irreconcilable with its verity; and I must conclude that, in so far as these witnesses are concerned, the will is proved by the presumption arising from the form of the attestation clause. Mundy v. Mundy, 15 N. J. Eq. (2 McCart.) 290; Allaire v. Allaire, 37 N. J. Law (8 Vr.) 326. If, however, I were in doubt, such doubt would be resolved in favor of .the due execution of the will by the evidence of John D. Baltz, who drew it. He is a lawyer, a brother-in-law of the testator; he took the will to him to be executed, attended to its execution, and swears in detail to its execution, according to the law of New Jersej'. Supplemented as his testimony is by the attestation clause, T cannot doubt that this will ivas duly executed by at least Cook and England, and that it should be admitted to probate.
    “No evidence was offered to overcome the presumption afforded by the verity of the attestation clause. The effect of this, the verity ox the attestation clause, is to throw the burden of proof upon the opponents of the will. Turnure v. Turnure, 35 N. J. Eq. (8 Stew.) 440; Tappan v. Davidson, 27 N. J. Eq. (12 C. E. Gr.) 460; Mundy v. Mundy, 15 N. J. Eq. (2 McCart.) 290; Allaire v. Allaire, 37 N. J. Law (8 Vr.) 312. The only evidence offered by the caveatrix was that of the architect as to the rooms, and this affected the signature of Beetem alone. As before shown, this was unnecessary to the due execution of the will, I being satisfied that Cook and England had duly executed it. Allaire v. Allaire, 37 N. J. Law (8 Vr.) 328.”

      Messrs. French & Richards, for the appellant.

      Mr. Loewis Starr, for the respondent.
   The opinion of the court was delivered by

Swayze, J.

The ordinary affirmed the decree upon the opinion of Judge Joline. We concur in the opinion and .would add nothing were it not for the fact that two objections to the admission of the testimony of Mr. Baltz are urged in this court. The first is, that as he is an executor and one of the proponents of the'will lie is incompetent under the statute to testify as to transactions with the deceased. The second is, that as he was the attorney and counsel of the testator in the execution of the will his evidence is incompetent for that reason. The first question raised has not been decided by this court. It has been the subject of decision in three eases in the prerogative court. Mackin v. Mackin, 37 N. J. Eq. (10 Stew.) 528; Grant v. Stamler, 68 N. J. Eq. Robb.) 555; McLaughlin’s Will, 69 N. J. Eq. (3 Robb.) 479. In all of these cases the testimony is held to lie admissible. The reason was well stated by Chancellor Runyon in the case first cited. The statute applies only in the'case of civil actions. Proceedings for the probate of a will are not a civil action, but a judicial inquiry to ascertain whether the instrument before the court is the last will and testament of the deceased. We think the evidence was properly admitted so far as this objection is concerned. The other objection is equally untenable. The reasons are stated in Wigm. Ev. § 2311/.. We have nothing to add. The decree is affirmed, with costs.

For ajfirmance—The Chancellor, Chief-Justice, Garrison, Swayze. Trenoiiard, Bergen, Yoorhees, Minturn, Ealiscit, Bogert, YredenburghJ Congdon, White, -Treacy —14.

For reversal—None.