author: Reed, V. C.

text:
    Charles R. Evans v. Abram Lower et al.
    [Filed May 28th, 1904.]
    1. "Where a building contractor became insolvent before the completion of the work, and the sureties on his bond bought material for him and became responsible for labor to be used by the contractor in completing the contract, they had no prior lien on the amount due the contractor on completion of the contract, but stood in the same position as any other person furnishing labor and material.
    . 2. Where a materialman presented his bill to the contractor, stating that a notice was to be presented to the owner, and though there was some talk about the examination of vouchers, there was no claim that the bill was incorrect or that the contractor offered to pay it, there was sufficient evidence of a demand on the contractor to support a notice to the-owner.
    8. A materialman is not entitled- to a lien for tools furnished to a building contractor, nor for money furnished to the contractor to purchase material.

      4. A notice, under section 3 of the Mechanics’ Lien law, is not invalidated by improperly including therein, in good faith, items to which the claimant is not entitled.
    On bill of interpleader, filed by the complainant, who owed a portion of the contract price for building a cottage, against which retainers have been filed by laborers and materialmen.

      Mr. Eclwin P. Longstreet, for the complainant.

      Mr. Frank Durand, for Messrs. James M. Yannote & Son.

      Mr. Ilalsted II. Wainwright, for Albert Lavance and William E. Pearce.

      Mr. Thomas C. Curtis and Mr. John H. Backes, for Joseph Backes.
   Reed, V. C.

Abram Lower agreed, in writing, to build, for Charles E. Evans, a cottage at Point Pleasant, for the sum of $2,535. Joseph Backes, and C. B. Yan Camp executed a bond to Mr. Evans, conditioned that Mr. Lower should execute his contract. The contract was duly filed and the work begun by Lower. Before the completion of the cottage notices were served upon the owner, Mr. Evans, of claims against the contractor, for work done and materials furnished by him on account of the erection of his cottage. J. M. Yannote & Son served a notice, on April 30th, 1903, for $802.94; Joseph Backes, on the same day (a little later), served a notice of a claim for $365.15; William Pearce, on May 1st, for a claim of $69.45, and Albert Lavance, on May 15th, on a claim for $55.

There was still unpaid upon the contract price $852.15. This amount has been, paid into court by the complainant.

Out of this fund the sureties claim to be first paid $220.95, the amount which it cost them to finish the building after,i as they insist, Mr. Lower had abandoned its erection.

I am unable to place these sureties in the same position as those in the ease of St. Peter’s Church v. Vannote, 66 N. J. Eq. (21 Dick.) 78. In that case the contractors had abandoned the work, so as to give the owner the right to complete it. By consent of the owner, through his agent, the sureties were permitted to complete the contract, as tire owners might have done had they so chosen. Instead of doing it themselves they permitted the sureties to finish the work, and thereafter the contractors had no control over it.

In the present case there was no abandonment of the work to the owner. The owner never got a right to complete and take out the cost of completion from the contract price. The contractor went on and finished the work, but because of the want of funds and credit, the sureties bought for him or engaged to be responsible for the labor and materials afterwards used in "the completion of the job. A knowledge by the owner that the contractor was insolvent, and that someone was furnishing materials and labor for the contractor, gave the owner no control over the completion of the building; that was an arrangement between the contractor and the parties backing him. For such labor paid and for the materials furnished the sureties stood as any other person so furnishing labor and material, and must rest any claim upon the fund due to the contractor upon their demand and notice, or upon a legal or equitable assignment of the contractor’s rights in the contract price. In this case, as between the contractor and owner, there was nothing to prevent the former from suing for the whole contract price upon the completion of the building. This differs from the case where there is an abandonment, and the owner, or someone by his direction or permission, completes the building. The contract price is then not entirely owned by the contractor, and the notice can only reach wdiat he has earned.

Therefore, I am compelled to the conclusion that the sureties have no right prior to that of the notifying labor and material-men to payment.

The next question arises in respect to the claim of J. M. Van-note & Son, who gave the first notice.

It is first objected that no demand upon the contractor was made by them prior to their notice to the owner.. I think there was. It is true that Mr. Lower says that no express request for pa3'ment was made. lie admits, however, that the bill was presented to him, and that it was then stated that a notice was to be presented to the owner. It is clear that he understood the purpose for which the bill was presented, and it is equally clear that he did not pay it, and that he had no money to pay it. This situation both he and Mr. Yannote understood. The talk between them about the examination of vouchers amounts to little, for there is no pretence that Mr. Lower offered to pay the bill in case he found it to be correct. Hor does he pretend that the bill was incorrect. . But, Mr. Joseph B. Yannote, who presented the bill, says that Mr. Lower remarked that he did not have the money to pay it with, and this is likely to have been said under the circumstances. So I think that it is proved that there was a demand.

It is again insisted that the notice is a nullity, because J. M. Yannote & Son filed a notice for a sum in excess of the amount for which they would have been entitled to file a lien.

It appears that Yannote & Son advanced $105 to Mr. Lower to enable him to buy mill work, in which Yannote & Son did not deal, and which mill work went into this cottage. How, this sum of $105 was due from Lower to Yannote & Son but was not a sum for which Yannote & Son could file a lien against the cottage. I think, however, that the mistake was not such as to invalidate his notice. The claim of Mr. Joseph Backes is also attacked, because he included in his claim a charge for certain tools furnished to Lower, to be used in the work upon the cottage. The bill amounts to $6.41. This part of the bill was not a lienable claim, and was made mistakenly, but in good faith, and does not invalidate his notice.

The result reached is that the first claim in order of priority is that of Lavance, for $55 for labor. The next is J. M. Yannote & Son, less the $105 already mentioned. The next, Joseph Backes, for $365.15, less $6.41 already mentioned. The claim of William Pearce is not for labor and so must stand upon the time when his notice was served.


source: Caselaw Access Project

license: Public Domain

text:
    William C. Rapp v. Ella Riddle Rapp.
    [Filed May 31st, 1904.]
    Desertion by a husband, which has existed during the period fixed by the statute as ground for an absolute divorce, axjpearing- by his own testimony, is a bar to a divorce against the wife for subsequent adultery, though it is not pleaded in bar.
    On bill for divorce on the ground of the defendant’s adultery.

      Mr. Matthew Jefferson, for the complainant.
   Reed, V. C.

The testimony supports the finding of a master that the defendant, between the months of August and December, 1901, committed adultery with one Albert Searle.

The complainant swears, however, that he left his wife in March, 1897, and has never lived with her since. He assigns as cause for leaving her that she drank and ran around with other men and carried on so that he could not live with her. He seems never to have sought her since he left her.

The facts, so barely stated by him, display a desertion by the husband, a separation from his wife without her consent for no proved cause, i. e., no cause for which he would be entitled to a divorpe.

So far as appears, therefore, the defendant, in March, 1889, had been deserted two years, and the adulterous 'acts proved against her were committed after March, 1899.

That the adultery of a complainant bars him or her from procuring a divorce against a defendant for the same cause is entirely settled. It seems equally clear that complainant’s adultery is also a bar against a divorce for defendant’s desertion. Reid v. Reid, 21 N. J. Eq. (6 G. E. Gr.) 331, 333. The present ease presents the converse of this proposition.

I am of the opinion that, as the testimony stands, the complainant is barred from asking for a divorce.

The doctrine of recrimination is discussed by Mr. Bishop in chapter 2, volume 2, of his work on Marriage and Divorce. In section 93 he lays clown the rule that any conduct for which the law provides the same consequences, whether the conduct be of the same sort or not, will bar a suit for dissolution of marriage. Inasmuch as desertion and adultery are under our statutes each a ground for divorce a vinculoi, they fall within this rule.

The reason for a bar is sometimes said to be that the complainant is in pari delicto and does not come into court with clean hands. In other cases the reason assigned is that it is a logical paradox to grant a divorce to two persons, each being entitled to a decree against the other, and therefore the court will aid neither.

This question was stirred before Chief-Justice Beasley, sitting as master in Adams v. Adams, 17 N. J. Eq. (2 C. E. Gr.) 324. It was not necessary for him to decide in that case whether desertion by the complainant was a bar to her right to a divorce because of defendant’s adultery, since he found that the desertion had not existed for the statutory period. The view expressed, however, respecting the efficacy of such a recriminatory plea, if proven, was in favor of the defence.

The same question was before Chancellor Zabriskie in the ease of Hedden v. Hedden, 21 N. J. Eq. (6 G. E. Gr.) 61, 76. The case was decided upon another ground, but the chancellor alluded to the question with the remark that the courts of some states, with statutes like ours, had held that desertion was a sufficient bar to divorce for adultery.

In Reading v. Reading, Supp. Stew. Dig. 188, Vice-Chancellor Bird held that to a bill for divorce upon the ground of adultery an answer, setting up cruelty on the part of the complainant, was a good answer. This also seems to have been the view of Chief-Justice Beasley in Adams v. Adams, supra.

This view carries the doctrine of recrimination a step further than required in the present case, inasmuch as cruelty is a ground for divorce a mensa only. Where the recriminatory act will support the same kind of defence as the act charged in the bill, the weight of authority in this country, as well as reason, is in favor of the validity of the defence.

That a desertion which has existed during the period fixed by the statute as ground for an absolute divorce should be a bar against the deserter asking for a divorce against the deserted party for a subsequent adulterous act seems manifest.

. A man who leaves his wife without his protection, subjected to the temptations which assail a deserted wife, has little cause for complaint if she unfortunately yields to the solicitations which her situation invites. The meagreness of the claim which such a man has upon the divorcing branch of the government is depicted by Lord Brougham in the matter of Simmons Divorce Bill, 12 Cl. & F. 339.

Admitting, therefore, that desertion would be a bar if pleaded, the question remains, should the court, of its own motion, take notice of a complainant’s conduct in an ex parte case? The rule is undoubtedly settled that recrimination is a counter charge which must be pleaded with certainty.

Chancellor Zabriskie, in Jones v. Jones, 18 N. J. Eq. (3 C. F. Gr.) 33, held that the court could not lay hold on any matter not put in issue, and he distinguished between a recriminatory defence and a case where collusion appeared.

This view of the chancellor’s is the subject of some suggestive remarks by Mr. Bishop in section 341 of the second volume of his Marriage and Divorce. Mr. Bishop doubts the applicability of the rule in all cases where it might appear upon the trial, although not pleaded, that the complainant is guilty of an act which, if pleaded, would debar him from the divorce.

■ However that may be, it does not affect the present matter, for an exception to the rule, stated by Chancellor Zabriskie, is admitted by him, and'the exception is where the complainant, in putting in his ease, himself shows his own guilt.

This is what the complainant has done in the present case. The divorce must be refused.


text:
    Charles H. Olden v. Uriah Sassman.
    [Filed June 3d, 1904.]
    1. A lessee in a lease of a farm for one year, -with the privilege of renewal for five years more, filed a petition in bankruptcy within a month after .the execution of the lease. There was no representation of the lessee’s responsibility, and he equipped the farm with the cattle and implements called for in the lease. — Held, insufficient to warrant equity in canceling the renewal clause on the ground of the lessee’s fraud.
    2. The bankruptcy of the lessee under a lease demising the premises for a fixed term, with the privilege of renewal occurring during the fixed term, did not dissolve the agreement so as to authorize equity to cancel the renewal clause.
    3. The fact that a lessor executing a lease for a fixed term, with the privilege.of renewal for another fixed term, only held the premises for life, did not affect the rights of the parties to the lease.
    On bill, answer, replication and proofs.

      Mr. Fergus A. Dennis and Mr. John T. Bird, for the complainant.

      Mr. James J. Cahill, for the defendant.
   Reed, V. C.

This bill is filed to have a lease declared void at the end of a term of one year, and to have the following words in the agreement, namely, “That the privilege of the renewal of this lease for a further term of five years on the same terms and conditions,” also declared to be a nullity.

The grounds upon which this relief is asked by the landlord is that the tenant, during the present year, has violated his agreement in failing to do certain things required of him in the lease, namely, to spray the apple trees, to plant forty-five acres of corn, to divide the money received by him from the sale of milk and for the crops sold. Also that he has failed to plant and cultivate the corn and potatoes in a husband-like manner.

In respect to his conduct in planting the corn and cultivating it, and the potatoes, it is not clear that he fraudulently neglected to do what he could do under the circumstances.

In respect to the division of the money received from the sale of the crops he says, and I think truly, that he was advised by his counsel that he was under no obligation to do so until they were entirely, sold. The failure to divide the money received from the ,milk sold seems to have been entirely inexcusable.

In addition to the cases already mentioned it is proved that after this agreement was made, on February 28th, 1903, the defendant filed a petition in bankruptcy in the United States district court for the eastern district of Pennsylvania, and was thereon adjudged a bankrupt. This petition was filed on March 17th, 1903, and he received his discharge on September 28th, 1903.

The question is presented whether any ground of equity jurisdiction to cancel the agreement is shown.

The prayer of the bill is to have excised from the agreement the clause respecting the privilege of renewal and to declare that the tenant’s interest in the premises cease at the end of the first year; or, in other words, that he had no legal or equitable interest in the same by reason of the clause of renewal.

There is no doubt that a court of equity will refuse to grant relief to a tenant and refuse to decree specific performance of an agreement to renew whenever the conduct of a tenant as lessee, while such, has been inequitable; thus, where a tenant has been guilty of waste, or has broken his covenants not to assign his lease, and the, landlord, under the clause for re-entry, has brought an action for ejectment, it was held that a court of equity would not enjoin the action. Hill v. Barclay, 18 Ves. 56. So the court will not decree a specific performance of an agreement to renew a lease where the tenant has violated his-covenant- that the rented premises shall be used as a private dwelling. Gannett v. Albree, 103 Mass. 372. So the text-books say that insolvency of the tenant is a ground for refusing specific performance of an agreement to renew a lease. Tayl. Land. & T. § 337. The cases cited in support of the latter statement, however, do not support the unqualified language of the text. Lord Eldon, in Buckland v. Hall, 8 Ves. 92, said that insolvency was an objection of weight, and upon that and other circumstances an injunction against an action in ejectment brought by the landlord was refused.

There is no doubt, however, that where the tenant has been guilty of inequitable conduct,'or has become irresponsible, and is unable to assure the execution of the terms of the lease, a court will refuse him any affirmative relief. 12 Am & Eng. Encycl. L. (1st ed.) 1011.

The question here is not whether the court will grant affirmative relief to the tenant but whether the court will make a decree in favor of the landlord against the tenant. The decree is asked for mainly upon the ground that by his conduct, while a tenant, the latter has forfeited his right to a renewal of the lease.

Courts of equity will sometimes relieve against a forfeiture, but in the language of Mr. Pomeroy

“if is a well settled and familiar doctrine that a court of equity will not interfere on behalf of the party entitled thereto and enforce a forfeiture, but will leave him to his legal remedies, if any, even though the case might be one in which no equitable relief would be given to the defaulting party against the forfeiture.” 1 Pom. Eq. Jur. § 459.

Indeed, it is to be observed that there is not even a forfeiture provided for in the agreement under consideration, for the lessor has not included in it a clause for re-entry in case of breach of covenants or any condition upon which the right of renewal shall be lost by the conduct of the tenant.

If the clause of renewal is to be canceled, upon what ground can it be done? There was no illegality or mistake in the execution of the agreement. The right to cancellation of the clause for renewal must therefore rest upon some fraudulent conduct of the defendant by which the execution of the agreement was induced. The only ground which can be alleged is that the defendant was insolvent at the time tire agreement was entered into, and that he fraudulently concealed that fact from the complainant. Now, the only testimony which can be pressed into service to show his insolvency and his concealment of that condition are the two facts that the agreement was made on February 28th and that the petition in bankruptcy was filed on March 17th following.

There was, so far as appears, no representation of the tenant’s responsibility, and it appears that he actually equipped the farm with the cattle and farming implements called for in his agreement.

I am unable to find, therefore, any sufficient proof that the tenant caused Mr. Olden to enter into this agreement by a false representation or concealment of a subsisting material fact.

It is also insisted that the prayer of the bill should be granted for the reason that upon the occurrence of the bankruptcy of the defendant the agreement became dissolved.

N ow, the right of a tenant under the lease, for the lease seems to have been a pure demise, undoubtedly passed to the trustee in bankruptcy. But I am unable to see how, even if the trustee was a party to this suit, that fact could enlarge the jurisdiction of this court to cancel the agreement. Certainly, an expressed assignment of the lessee’s interest to a third party would not have this result.

Nor do I perceive that the fact that Mr. Olden held the farm by a life tenure only adds anything to the strength of complainant’s case. The clause for renewal might result in inconvenience to the representatives of the lessor should he die during the term. But I do not perceive how that fact alone can affect the rights of the parties under the clause in the executed agreement.

I am constrained to the conclusion that the bill should be dismissed.


text:
    Vulcan Detinning Company v. The American Can Company et al.
    [Filed June 13th, 1904.]
    1. In a bill to restrain defendants from utilizing a certain trade secret belonging to complainant, an allegation that complainant was the assignee of the secret under an assignment from a certain partnership, which was the owner of the same, was sufficient, without an allegation showing that either of the partners was the inventor or discoverer of the secret, or an allegation tracing the title of the copartnership back to any inventor or discoverer.
    2. A trade secret is assignable, and the assignee is entitled to an injunction restraining those who had been employed by his assignor, having knowledge of the secret, from utilizing the same.
    3. AVhere, in a suit to restrain defendants from utilizing a trade secret belonging to complainant, complainant’s bill traced title to the secret to complainant through various assignments, and the date at which the assignment was made to complainant was given as April, 1898, while the date of the assignment to complainant’s assignor was fixed at February, 1S99, the discrepancy was obviously a mere clerical error.
    4. AVhere one assigned a trade secret, but did not become the owner thereof until subsequently, his assignee took title by estoppel.
    5. A bill to restrain defendants from utilizing a trade secret belonging to complainant alleged that defendants utilized all the devices owned and controlled by complainant, including many for which patents had not been applied for, and for which patents have since been granted complainant. — Held, that a contention that it appeared that many parts of the process had been published, and that it did not appear which part remained secret, and that for infringements of a patent process relief must be had in the federal courts, was of no merit, the language of the complaint meaning that there were patented as well as unpatented devices, and it not being incumbent on the pleader to separate the one from the other.
    6. AVhere a bill to restrain defendants from utilizing a trade secret belonging to complainant alleged that one of the defendants had, by the help of all the other defendants, established and carried bn a plant for the utilization of such secret, it was proper to unite all such defendants in the bill.

      7. Where one becomes bound by contract or confidence to another not to reveal a trade secret possessed by the other, he cannot, in a suit to restrain him from utilizing such trade secret, set up that complainant had no right to it because it had been obtained honestly by complainant from one who had dishonestly obtained the knowledge from the discoverer. •
    8. Where, in a suit to restrain defendants from utilizing a trade secret belonging to complainant, it appeared that all of the knowledge of such secret that defendants possessed had been acquired by them as officers and employes of complainant’s assignor, but it appeared from an affidavit on behalf of the defendants that affiant was the inventor of the process, and that it was dishonestly procured from him by complainant’s assignor, a preliminary injunction will not be granted, but merely a limited one restraining defendants from communicating any part of the secret to any person, and from employing any person in the utilization of the secret other than those employed at the time.
    On demurrer to the bill and upon a rule to show cause why an injunction should not issue restraining the defendants from utilizing a trade secret.
    The bill sets out that the Electro Tinfabriek, a foreign co-partnership, was in 1898 the owner of a secret process’ for detinning tin scrap; that on February 19th, 1899, the Tinfabriek assigned the secret process to A. Kerns & Company and their assigns, giving them a statement in writing of such secret process and of the manner of erecting plants for its utilization; that Kerns & Company, on April 23d, 1898, assigned the said process to the Yulcan Metal Refinipg Company of New Jersey, which company erected a plant at Sewaren, New Jersey, under the direction of M. Laenes, a member of said Electro Tinfabriek; that two of the directors of the Yulcan Metal Refining Company and of its executive committee, who negotiated this assignment, were Eranz A. Assman and Adolph Kerns; that for the purposes of preserving the secrecy of the process a written statement of it was confided to each of four directors, of whom Eranz A. Assman was one; that Assman had opportunities to examine the operations of the complainant; that the business of the complainant was successful.
    The bill then states that a New Jersey company, known as the Yulcan Western , Company, was organized on July 25th, 1899, which, company built a plant at Streator, Illinois, of which company Mr. Assman was a director and member of its executive committee until June 1st, 1901; that this company obtained from the Vulcan Metal Eefining Company the right to use the secret process, and began business at once; and that the two companies mentioned made improvements in the construction and operation of their plants, which improvements were kept secret from all persons except their trusted employes and officers, including Mr. Assman; that one Philip Bauman was employed as foreman in the Sewaren plant, and as such became familiar with the construction and operation of the plant; that one Gustav Sehmaal was employed as chief engineer and one Solomon W. Egbert as foreman, and as such they became acquainted with the process; that in June, 1901, Assman sold his stock in the Vulcan Metal Eefining Company and in the Vulcan Western Company to Adolph Kerns, who was then a large stockholder in both companies and is now a large stockholder in the Vulcan Detinning Company, for a large advance over what he paid for it, and that its value arose from the ownership by the two companies of the secret process; that Assman then resigned as director and member of the executive committees of both companies, and, after demand, returned the written statement of the secret process which he had retained possession of until such demand; that in April, 1902, the Vulcan Metal Eefining Company and the Vulcan Western Company sold and assigned its plant, machinery and secret processes to David LeBoy and Gustav Eckstein and their assigns, and that, on May 1st, 1902, they sold and assigned their rights in the same to the complainant.
    The bill then sets out that in March, 1901, Mr. Assman, while still a director of the two Vulcan companies, caused to be organized a New Jersey company, known as the American Can Company, of which he became director and chairman of its executive committee and practically the head of the company, which position he still retains; that he employed Bauman, Sehmaal and Egbert, and erected new plants, one at Paulsboro,. New Jersey, and .the other, at Joliet, Illinois, in the construction and operation of which plants the secret process was employed. It sets out that the knowledge of Assman, Bauman, Schmaal and Egbert was utilized, and that the new companies utilized all the devices owned and controlled by the complainant, including many for which patent's had not yet even been applied for and for which patents have since been granted unto the complainant; that they are now - operating said plants under said processes; that the defendant companies are trying to employ the servants of the complainant by large rewards and have sought to acquire from complainant’s employes a knowledge of all its methods of constructing and operating under its secret processes.
    The bill states that while Egbert was still in the employ of the complainant, he furnished information to Assman and the American Gan Company concerning the secret processes, and that Egbert, after agreeing to enter into the sendee of the can company, remained with the complainant for the purpose of acquiring and communicating to the can company the details of the construction of the plant of the complainant and all improvements therein, and the operation under said secret processes, which information the defendants are now using.
    The bill prays for an injunction against Assman and the American Can Company, restraining them from operating the plants at Paulsboro and Joliet and other similar plants by the secret processes, and restraining Bauman, Schmaal and Egbert from performing any further services in said plant, or utilizing or communicating the said secret processes.

      Mr. Robert II. McCarter, attorney-general, and Mr. Hem-y Woilman (of the New. York bar), for the complainant.

      Mr. Thomas M. Day, Mr. P. G. Bartlett and Mr. Thomas Thatcher (of the New York bar), for the defendants.
   Reed, V. C.

The arguments are directed to two questions — first, whether the bill is demurrable; and second, if not, then whether upon the affidavits submitted a preliminary injunction should go. I will consider the questions in their order.

The first ground assigned by the demurrants is that the bill discloses no ground for equitable relief.

The particular criticism upon the bill under this head is that there is no allegation showing that either of the partners composing the copartnership mentioned as Electro Tinfabriek were the inventors or discoverers of the secret process, or that they trace the title of this copartnership back to any inventor or dis.coverer.

As a rule, the statement of ownership in a complainant of the property for an injury to which relief is sought is sufficient. Houghton v. Reynolds, 2 Hare 264; Tudor v. Cambridge Water Works, 83 Mass. 164; Ely v. New Mexico & Ar. Co., 129 U. S. 291.

I am of the opinion that the statement of the fact that the assignee of the complainant was the owner of the secret processes was a sufficiently certain statement of the fact.

The second criticism of the bill under this head is that, assuming that the Tinfabriek copartnership once owned the secret, no transmission of its right to ask judicial protection of this right passed to the complainant.

The' argument in support of this proposition is that a trade secret, from its inherent quality, is non-assignable; otherwise there would be no- need for obtaining patents. It is to be observed, however, that a valid patent protects its owner and his assignees and licensees against everyone infringing it, while a trade secret protects its owners only against those who have learned the secret under a contractual or confidential obligation to preserve the secrecy.

The assignability of a secret process was recognized in Tode v. Gross, 127 N. Y. 480, 485; Thum v. Tloczynski, 114 Mich. 149; Fowle v. Park, 131 U. S. 88; Simmons Medicine Co. v. Simmons, 81 Fed. Rep. 163. ’No case has been cited in which the ability of a discoverer of a trade secret to sell the same has been denied. I think the title of the complainant is sufficiently stated.

Nor do I think the chain of title is broken by the fact that the date of the assignment from Kerns & Company to the Vulcan Metal Refining Company is stated to be April, 1898, while the date of assignment to Kerns & Company is fixed at February, 1899. The last date is obviously a clerical error. But, apart from this, the title which Kerns & Company got would have passed by estoppel to the Vulcan Metal Refining Company. Kane v. Loder, 56 N. J. Eq. (11 Dick.) 268, 274.

The second ground assigned' by the demurrant is that it appears by the bill that many parts of the secret processes had been, published, and that it does not appear that any part thereof remained secret. In support of this insistence the following language of the bill is cited, namely: “The defendants utilized all the devices owned and controlled by your orator, including many for which patents had not been applied for and for which patents have since been granted to your orator.” The point made is that for infringements of a patented process relief must be sought in a federal court. But the language quoted means that there -were unpatented as well as patented devices. It was not incumbent upon the pleader to separate the one from the other by a detailed description of the one class or of both classes.

The third ground assigned is that it does not appear that the causes of action are vested in the complainant.

The objection taken under this head is not rested on the nonassignability of the trade secret already considered. The argument for the demurrant is this, namely, that Bauman, one of the defendants, was employed not by the complainant but by the Vulcan Metal Refining Company, and Schmaal and Egbert, two' other defendants, were employed by the Vulcan Western Company ; that the right to hold these men to secrecy, if it existed at all, belonged solely to the companies for which these defendants worked, and that the bill shows no assignment of such rights existing in those companies to the complainant. This view differs the question of the assignability of the trade secret from the question of the assignability of the right to preserve the secret, and it distinguishes the latter from the former, so that the assignability of the secret will not include the right to enforce the preservation of the secrecy. In my judgment this view is not sound. The duty of the employe arising by contract or .by confidence reposed in him to preserve the secrets of the business was undoubtedly primarily owed to the employer. The right to enforce this duty of silence was a factor, indeed a most important factor, in estimating the value of the secret. It was a part of the property in the secret. To say that the owner can sell the secret, but the vendor cannot assert this right of the owner and protect the secret from revelation, would in most instances place the assignee at the mercy of the assignor. In equity the contract held by, and the duty owing to, the owner of a trade secret is not merely assignable, but the assignee of the trade secret has a part of the property right transferred — that is, the right to utilize and protect the secret passes to the assignee.

The right of the two companies, by whom the defendants already mentioned were employed, to enjoin them from revealing the secret passed to the complainant.

Lastly, it is objected that the bill is multifarious.

I cannot conceive of an instance in which the propriety of uniting several defendants in a single suit is more conspicuous than this. All of the defendants were directly concerned in a single movement, by which, as the bill charges, Mr. Assman, by the help of each of the other defendants, organized plants and operated them in violation of a duty which each defendant owed to the complainant. The demurrer should be overruled, with leave to file an answer in twenty days.

The next question is whether an injunction should be advised. Mr. Assman, in his answering affidavits, admits that after it was decided by the American Can Company to provide detinning plants, he, in April, 1902, had an interview with Mr. Schmaal, who was not then, but had previously been, employed by the Vulcan Western Company; that Schmaal told him that he could put up and operate a plant for detinning scrap,, and he told Schmaal to set up an experimental plant in one of the factories of the American Can Company, and to demonstrate that he could successfully apply his process. Assman says that Mr. Schmaal set up such a plant, and then the officers oi the company determined to build two plants, one at Paulsboro and the other at Joliet, and afterwards they were constructed by Mr. Schmaal, he retying upon his own knowledge. Assman says that he gave no instructions and was not competent to do so and first visited the plants after they were completed.

Mr. Schmaal swears that he built the plants by his own knowledge and not from anything Assman told him, nor from any paper Assman showed him.

The affidavits leave no doubt in my mind that Mr. Schmaal was employed by Mr. Assman, because of the familiarity of the former with tire secret processes. As to these two defendants, of which Mr. Assman was and is the head, it is clear that they axe using a process concerning which they were under air obligation, springing out of their relations with the Vulcan companies, not to reveal and not to use otherwise than in the service of the Vulcan companies. Mr. Bauman and Mr. Egbert stand upon a different footing, as, according to the answering affidavits, Mr. Bauman sought service from Mr. Schmaal and was emplojred by him at Paulsboro two months after the works had been in successful operation. Mr. Egbert sa3's that he was employed as contractor to erect the plant at Joliet, and that he did so according to the instructions given and plans furnished by Mr. Assman, and that he never gave any instructions to Assman or Schmaal, or to the can company, respecting the construction or operation of a detinning plant at Streator. He denies having furnished information to Assman or the can company while he was employed at Streator, or that he remained in the emplojment of the complainant or any other company for the purpose of being enabled to more accurately furnish information from time to time to the can company, as charged in complainant’s bill.

There is, however, another phase of the case, appearing in the affidavit of Dr. Goldsmith, who says 'that he is the original inventor of the detinning process used by the complainant; that he erected a plant and used such process at Essen, in Germany, in 1889. He says that his secret process was procured by fraud by M. Laen.es and two others, who enticed away some employes of Dr. Goldsmith, and that these persons organized the Electro Tinfabriek in Holland, by which copartnership, as already stated, the complainant is empowered to use the secret.

According to Dr. Goldsmith’s affidavit, he inspected the defendants’ plant at Paulsboro and says that the method of operating that plant is similar to his at Essen.

It does not appear, that Dr. Goldsmith has ever assigned his right to the trade secret to the defendants. It only appears in the affidavit of Mr. Assman that the doctor, upon inspection of the plant at Paulsboro* expressed his satisfaction with it and promised to communicate any improvements he might make, requesting at the same time the can company to give him the benefit of any improvements devised by it.

Assuming the accuracy of these statements, there can be no doubt that a person or company could be authorized by Dr. Goldsmith to install a plant and use the process. The defendants, however, do not occupy this position. The can company did not install its plant by virtue of any authority from Dr. Goldsmith. When they put this plant into operation they knew nothing of such a person as Dr. Goldsmith or of his methods. All the knowledge the officers and managers of the can company possess had came through Mr. Assman and the employe or employes of the Vulcan company. How, the title to this trade secret, held by the Vulcan company, was, I think, good against everyone but Dr. Goldsmith and his assignee.

A person who became bound to the Vulcan company by contract or by confidence cannot, as against that company, when suing for a breach of such contract or confidence, set up that the Vulcan eompanjr had no right to such trade secret, because it had been obtained honestly from owners who had dishonestly obtained the knowledge from the discoverer.

The legal question arising upon this feature of the case, however, is not so clear or well settled as to warrant a preliminary injunction, which would arrest the transaction of all the business of the defendants.

I will, however, allow a limited injunction, restraining all the defendants from further communicating any part of the trade secret to any person, and from giving any further instructions concerning the processes to any employe, and from employing any person in the transaction of the business involving the use of the trade secret other than tiróse now employed.


text:
    Richard T. Miller, receiver, v. William G. Audenried, Jr. Richard T. Miller, receiver, v. Eastern Milling and Export Company. Richard T. Miller, receiver, v. New Jersey Trust and Safe Deposit Company.
    [Filed June 3d, 1904.]
    1. In a suit by the receiver of an insolvent corporation to recover payments alleged to have been made by the officers ‘of the corporation after its insolvency and suspension of business, evidence held to show that when the payments were made the corporation was insolvent and had suspended its ordinary business.

      2. Corporation act, section 64 (Gen. Stat. p. 919), enacts that on the final dissolution of any corporation all its estate shall vest in the stockholders in their respective proportions.- — Held, that the suspension of business by a corporation, owing to the destruction of its plant by fire, did not bring the corporation within section 64.
    3. Where, in a suit by the receiver of an insolvent corporation to recover a payment made by the officers on a note after insolvency and cessation of the corporation's business, it appeared that the corporation had actually ceased to do business, and that the notes were paid after protest, a contention that they were paid in the ordinary course of business was without merit.
    4. Notes given by a corporation were endorsed.by its president, and the payee discounted them at a bank. Thereafter, and when the corporation was insolvent and had ceased to do business, it paid the notes, by reason of which payment no notices of protest were given. Subsequently the receiver of the corporation sued to recover the payment, the president being a party to the bill, and a decree prayed fixing his liability. — Held, ■that though the moneys had been paid to the bank the payee of the notes should repay the amount to the receiver, since the bank had lost its remedy on the president’s endorsement; but the payee had not lost its remedy on the officer’s endorsement, inasmuch as under the circumstances he would not be permitted to set up his discharge.
    5. Where, at the'time of the insolvency of a corporation, it had no claim against a bank, which held a note of the corporation not yet due, and the corporation, after such insolvency and the cessation of business, and before the maturity of the note, gave the bank a demand note, which the bank immediately charged up to a deposit of moneys made by the corporation that day, the bank was liable for the amount of the note to the receiver of the corporation.
    These suits are brought by the receiver of an insolvent corporation to recover of the respective defendants certain payments, alleged to have been made to them by the officers of the company after the company became insolvent and had suspended its ordinary business for want of funds to carry on the same as well as in contemplation of the insolvency.
    The first two suits were tried together, and the third was tried separately, but the main facts are so identical in all three that they will be considered together.

      Mr. Lewis Starr, for the complainant.

      Mr. Norman Grey, for the defendants Audenried and Eastern Milling and Export Company.

      Mr. John T. Flamed and Mr. Howard Garrow, for the New J ersey Trust and Safe Deposit Company.
   Reed, V. C.

The insolvent corporation, of which the complainant is -receiver, is the Haas Baking Company. This company was incorporated on May 23d, 1900, with a capital of $50,000, of which about $15,000 was paid for in cash and stock for the remainder was issued for good will of a former business. The company engaged in the baking and sale of bread, its plant being located in Camden. On the night of April 7th, or tire morning of April 8th, 1902, its plant was destroyed by fire. The officers of the company endeavored to- continue the business at Twent3rfourth and Hamilton streets, Philadelphia, ■ and did so until April 19th, when they entirely abandoned the ordinary business of the Compaq.

On May 6th following a bill was filed by Eleischmann & Company, one of its creditors, to have the Haas Baking Company declared insolvent and a receiver for it appointed. Under that bill the present complainant became the receiver.

Up to the time of the fire the company had a line of credit from its customers and its banking house, and had paid the renewal of its credits as they matured. After the fire, the president, Mr. Warr, says that the company intended to rebuild its plant and continue its business. As already observed, it did continue its business until April 19th. At that time the debts of the company were over $21,000, one of which was its own discounted note for $2,500, held by the New Jersey Trust and Safe Deposit Company; another, $1,000, was evidenced by two notes of $500 -each, made to Audenried, and still another, of $2,804, was due to- the Eastern Milling and Export Company. The property of the company consisted of a claim against certain insurance companies for unpaid insurance money, and in the horses, wagons, book accounts and the remnants of the plant left by the fire. The amount insured was $12,400, which amount was adjusted at the sum of $10,578. Erom the rest of the property the receiver seems to have collected $2,287.60. So that after the fire the company had from $12,000 to $14,000 of assets to pay oyer $21,000 of debts.

The conduct of the officers of the company after the cessation of business on April 19th may be generally stated as follows: The first installment of the insurance money was paid on April 24th and deposited in the company’s bank, the Tew Jersey Trust and Safe Deposit Company, on that date. The company’s balance in bank the previous day was $17.02, and had been from April 18th to April 22d, $8.70. The amount of deposited insurance money on April 24th was $1,411.95. On that day a check was drawn by the company, through its president and treasurer, to John O. Wilson, the treasurer and a director of the company, for $1,400 in his favor.

On the 26th of April there was received from the insurance companies and deposited $3,047.85. Out of this was paid a note of $500, which had been made to the Eastern Milling and Export Company. Dpon it were drawn two checks in favor of Mr. Wilson, amounting to $2,075.

On the ,28th of April there was received from the insurance companies and deposited $3,047.85. On the same day there was paid to Mr. Warr, president of the company, $500, and to Mr. Wilson, the treasurer, $475; in addition there was paid a note held by the Tew Jersey Trust and Safe Deposit Company of‘$2,509.17 and some other small checks. The balance left at the close of each of these days seem to have been as follows: On the 24th, $28.97; on the 26th, $514.57; and on the 28th, $34.26.

On April 30th there was received and deposited of the insurance moneys $817.95, and a check was drawn on this account for $817.65 in favor of Mr. Wilson. This left a balance of 73 cents at the close of that day, and this condition remained until May 5th. Therefore, of the insurance money received, $4,767.61 had been drawn by Mr. Wilson for himself, $500 for Mr. Warr, $2,509.17 had been paid to the Tew Jersey Trust and Safe Deposit Company and $500 for the payment of notes due to the Eastern Milling and Export Company.

Of the money drawn by Mr. Wilson from the insurance moneys deposited, he deposited to an. account called “The John O. Wilson Special Account,” opened with the New Jersey Trust and Safe Deposit Company on April 28th, the following amounts: April 28th, $475; April 30th, $817.95; May 5th, $246.20; total, $1,539.15.

The remainder of the $4,767.61, drawn by Mr. Wilson, seems to have been deposited to his individual account.

The payment of the Audenried claim, now sought to be recovered, was made as follows: Two notes made to Audenried, of $500 each, were presented for payment to the New Jersey Trust and Safe Deposit Company on April 29th, and there were no funds to the credit of the Haas Baking Company to pay them. Mr. Wilson deposited his own check for $1,003.08 on the 30th, and the two notes and the protest were then paid on that day. The check of Mr. Wilson used to pay these notes was drawn upon funds which had been received for insurance money, and checked out by him, and placed to his credit.

The dealings of the Haas Baking Company with the Eastern Milling and Export Company were as follows: The former company had bought most of its flour from the latter company. The arrangement was that there should be a settlement every Monday, or whenever a bill reached $500; that the Haas Baking Company was to give thirty or thirty-five day notes with Mr. Warr’s personal endorsement. At the time of the fire the Eastern Milling and Export Company had received a note for $500, dated March 26th, and a note of similar date for $500, both of which notes had been discounted at the National Security Bank, probably on the day of their date. In addition to these notes the Haas Baking Company owed the Eastern Milling and Export Company for flour delivered in Camden before the fire the sum of $475.50, and for flour delivered in Philadelphia after the fire the sum of $476.50. No note was given for these items, amounting to $952.

Now, Mr. Locher, the treasurer of the Eastern Milling and Export Company, says that, about the latter part of April, he ’phoned Mr. Warr and told him that he wanted the account paid, and that Mr. Warr said he would pay it immediately. Mr. Warr sent a cheek, dated May 1st, 1902, drawn to the order of the Eastern Milling and. Export Company by the Haas Baking Company for the snm of $952. Before that check had been deposited, Mr. Locher says, he received a telephone message from Mr. Wilson, stating that if he (Locher) would send the check to him by messenger, he would take care of it. Mr. Locher says he sent the check, and the messenger returned with Mr. Wilson’s check for the amount, which check was deposited in the bank and paid on May 8th by the New Jersey Trust and Safe Deposit Company.

This seems to have been paid by the New Jersey Trust and Safe Deposit Company out of a deposit made by Mr. Wilson on May 5th in the shape of his own check in favor of the Haas Baking Company. This check was drawn upon funds which Mr. Wilson had received from funds that Mr. Wilson had checked out to the New Jersey Trust and Safe Déposit Company, being portions of the insurance money.

The testimony shows that on April 19th the company suspended its business, and I think that it suspended its business not merely because of the want of a suitable place to carry it on, but because of the want of funds to do so. The suspension of business by reason of the occurrence of the fire' would not have brought the company within the provision of section 64 of the Corporation act. It is, however, clear that at the time, of the fire the company was heavily indebted, and the occurrence of the fire brought matters to a head. After a struggle of about ten days it was found to be impossible to continue the business. Actions for small amounts were begun against the company and there was no money to pay them until the insurance money was collected. Immediately after the occurrence of the fire the officers of the company expected to rebuild its plant and continue its business, but after the end of the Philadelphia experiment, and after actions “began, I am satisfied that this project was regarded as hopeless. The debts were so-large and the creditors began to be so clamorous for payment that the hopes of raising money to rebuild faded away. By the-time the first installment of insurance was paid the only thought; of -the officers was to take care of particular creditors. Mr. Warr, the president, was personally liable as endorser upon the unmatured note of $2,500, held by the New Jersey Trust and Safe Deposit Company, and as endorser upon the notes of March 26th to the Eastern Milling and Export Company, and possibly as guarantor of the bill of $952 due to that company.

As soon as the insurance money began to come in it was promptly distributed. This dealing was inconsistent with the idea that the company thought of continuing the business, and is only explicable upon the theory that only some of tire creditors should be paid in full, and that the officers should select the favored parties The conclusion is irresistible that on the 26th cf April the company had become insolvent, and it is also clear that it had suspended its ordinary business for want of funds to carry on the same.

On April 29th, the Audenried notes, drawn payable on demand, were presented to the New Jersey Trust and Safe Deposit Company. There were no funds to pay them until Mr. Wilson deposited his check for that amount. The money which paid the notes was, as already observed, insurance money.

It is insisted on behalf of Mr. Audenried that this payment was made in the ordinary course of business and cannot be recovered, even assuming that the Haas Baking Company was, at that time, insolvent.

I am aware that under the English bankruptcy statutes it has been held that a payment 'made in the ordinary course of business, even if made in contemplation of bankruptcy, if the payment is received in good faith, is not recoverable. Chancellor Williamson, in Receivers of Peoples Bank v. Paterson Savings Bank, 10 N. J. Eq. (2 Stock.) 13, 18, recognized this rule as applicable to insolvent companies under the section, now section 64 of our Corporation act. But the chancellor proceeded to remark that “it never entered into the head of any judge to say that a man, in contemplation of an act of bankruptcy, could sit down and dispose of all his effects to the use of different creditors, for that would be a fraud upon the acts of bankruptcy.” And, again, the chancellor declared that tire conduct then under consideration was in violation of the Insolvent act, because its sole purpose was to give a- creditor an advantage over other creditors. These remarks seem to ñt the conduct of 'the officers of this corporation in distriButing substantially all the effects of the company. When these demand notes were paid the company had ceased to do business, and the notes which were paid after protest were not paid in the ordinary course of business.

In my judgment there should be a decree for the recovery of these payments.

Yext, in respect to the moneys paid to the Eastern Milling and Export Company. I am of the opinion that the payment of the bill for $952 was dearly violative of the statute. It was made after the company had consulted with the representative of Eleischmann & Company, a creditor, about the appointment of a receiver. The payments to this company were also made because Mr. Warr was understood to be a guarantor of the claim.

The circumstances concerning the payment of $352 in cash by Mr. Warr are too obscure to base a decree that that sum should be returned. It was not paid by check upon the insurance fund or any o.ther funds of the company, so far as appears. Mr. Warr may have paid it out of the $500 he received, but it is not proved.

The feature which has caused me the most perplexity is the method in which the payment of the two.promissory notes due the Eastern Milling and Export Company should be dealt with. One of these notes was paid April 26th and the other May 5th. These payments were made undoubtedly after insolvency and after suspension of the company’s business. These payments would stand upon the same footing as those made to Audenried were it not for two distinctive features — first, the Eastern Milling and Export Company’s notes had upon them the. endorsement of Mr. Warr; and secondly, they had been discounted and were held by the discounting bank at the time of their payment.

The point is made that the party who received the money in' payment of these notes was the discounting bank and not the Eastern Milling and Export Company, and that if anyone is liable to repay it is the bank.

I have concluded, however, inasmuch as the payment discharged the contingent liability of the Eastern Milling and Export Company, who was also an endorser, which company had received the money in advance by way of discount, that in equity, where circuity of action is avoided, the Eastern Milling and Export Company can be reached in this suit. This is the only way of accomplishing an equitable result. For if the bank be compelled to repay, it will have lost at law the benefit of the endorsement for want of notice of protest.

But the Eastern Milling and Export Company had also the endorsement of Mr. Warr, which it lost at law by failure to give notice, the failure being caused by the payment of the note. Fow, inasmuch as Mr. Warr was cognizant, as president of the company, of the circumstances surrounding the payment, it would seem clear that he would not be permitted to set up his discharge as endorser. If Mr. Warr ‘had been made a party to the bill, and a decree prayed against him, fixing his contingent liability, I am of the opinion that such a decree could have been made. And I see no reason why the Eastern Milling and Export Company cannot, in equity, have its redress over against Mr. Warr.

In the present shape of the litigation I think there should be a decree compelling the Eastern Milling and Export Company to return the payments, as already indicated.

The third suit involves the liability of the New Jersey Trust and Safe Deposit Company to repay the amounts applied by it in payment of the $2,500 note.

It is insisted on behalf of the New Jersey Trust and Safe Deposit Company that it had the right to pay its notes out of the insolvent company’s funds on deposit, as this was merely an assertion of a right of sét-off, the principle of which was established in the case of Receiver v. Paterson Gaslight Co., 23 N. J. Law (3 Zab.) 283. The facts in that case were that when the insolvent bank stopped doing business the gaslight company had on deposit with it $455.90. At that time the bank held a draft which had been accepted by the gaslight company. The receiver of the bank sued the gaslight company to recover the full, amount of the draft, and the supreme court held that the gaslight company had a right to set off against this claim its right of action against the bank for the amount of its deposit. The counter claims existed at the time of the occurrence of insolvency, and at that moment the amount due either to or from the insolvent was the difference between the two claims.

Now, in the present case the Haas Baking Company had no claim against the bank at the time of its insolvency, nor at the time when it suspended business. At that time the New Jersey Trust and Safe Deposit Company held a sixty-day note for $2,500, made by the Haas Baking Company on April 6th. Upon it, as already observed, Mr. Warr was an endorser, and no doubt, because of that fact, the bank was selected as a preferred creditor.

On April 28th, Mr. Wilson says, at his suggestion, the sixty-days note was withdrawn and a demand note was substituted for it, which latter note was at once charged up to that day's deposit of insurance moneys. . .

Mr. Wilson says that the substitution of the demand note was made for the purpose of paying the $2,500 note, drawn at sixty days; that it was a form of receipt for our payment; that we could not get the other note as it was not due. Now, it is perceived that the right of the trust company to claim this deposit, unlike that in the cited case, arose after the insolvency of the company and after its cessation from business. Under these conditions no right of set-off came into existence. The transaction was a pure payment of the $2,500 note. Indeed, the circumstance in which this payment was made is analogous to the acts of the officers of the Peoples Bank in the case of Peoples Bank v. Paterson Savings Bank, supra. In that case the cashier of the insolvent bank handed over certain notes which belonged to the insolvent bank to a manager and trustee of the savings bank, a creditor. In .this case the president and treasurer deposits money and directs it to be applied to the payment of the notes held by the New Jersey Trust and Safe Deposit •Company, a creditor.

The principle • applicable is observable in the way the courts deal with the-acquisition by a debtor of an insolvent corporation of claims against that corporation after its insolvency for the purpose of setting them offi against a debt due to the insolvent-corporation. The principle is that where there is a statute prohibiting preference or assignments after insolvency, that the date of insolvency fixes the time, and claims purchased thereafter cannot be set off, regardless of the date when a receiver is appointed. Gluck & Beck. Rec. 470.

In my judgment the bank must account for the $2,500 and interest so appropriated by it.


text:
    Wallace Wilson et al. v. American Palace Car Company et al.
    [Filed June 18th, 1904.]
    1. The general rule is that an objection for want of parties, if apparent upon the face of the bill, should be taken by demurrer; but if not appearing in the hill itself, then- by plea or answer.
    2. Such an objection can also be taken on the hearing and the court may, of its own motion, arrest the suit for want of parties.
    On motion to dismiss the bill because of the absence of a party as defendant, without which a decree cannot be made.

      Mr. Robert E. McGarter, attorney-general, for the motion.

      Mr. Edward Q. Keasbey, contra.

   Reed, V. C.

The general rule is that an objection for want of parties, if apparent upon the face of the bill, should be taken by demurrer; but if not appearing in the bill itself, then by plea or answer.

Such an objection can also be taken on the hearing, and the court can, sua sponte, arrest the suit for want of parties. Booraem v. Wells, 19 N. J. Eq. (4 C. E. Gr.) 87, 95. Where there is no demurrer for want of parties, and the objection is not taken until the hearing of a general demurrer to the equity of the bill, the court will not listen to the objection; but if it can do so, will dispose pf the cause without requiring formal parties to be joined. This motion to dismiss is not made under the rule in the stead of a demurrer, but under what is claimed to be a general equity rule of practice. The motion can amount to no more lhan a direction of the attention of the court to an alleged defect, which is so radical that the court, of its own motion, would hold the suit until the defect could be remedied; or, if irremediable, would dismiss the-suit.

I will consider the status of tire suit in this view.

The gravamen of the suit is tersely and clearly stated by Vice-Chancellor Emery, when the cause was before him upon a plea (64 N. J. Eq. (19 Dick.) 534), and appears also in the opinion of the court of errors and appeals, reported in 65 N. J. Eq. (20 Dick.) 730. A stockholder of the American Palace Car Company, a Maine corporation, sued in behalf of the corporation. The bill stated that a majority of the Maine company had conspired to dispose of its assets to the American Palace Car Compaq, a New Jersey corporation, which company was to give the Maine corporation one-half of its stock and to assume the debts of the Maine company; that the Maine corporation had, in collusion with individual defendants, transferred the assets of that company to the New Jersey company, and that the New Jersey company had not given one-half of its stock to the Maine company or paid its debts, but had put its stock into the hands of still another American Palace Car Company, a New York company organized by one Denham, who was treasurer of the company, with the direction to deliver the stock and assets to a man named Hands, on payment of $60,000, who proposed, in connection with the treasurer of the Maine company, to mortgage all the assets for $250,000. The suit is brought against the New Jersey corporation, and those who formed it, to have them restrained from disposing of the assets and compelled to restore them to the Maine company.

These defendants filed a plea to the jurisdiction of this court because they were not served with process, not being within the limits of the state. This plea was held good by the court of errors and appeals. By this decision these defendants are not parties to the suit, and the dismissal of the suit is asked for upon the ground that without them the court could not make a decree in the cause.

, The dismissal of the suit would leave the complainants in the predicament that if they should bring suit in Maine they would be liable to be dismissed when confronted with the same objection by the New York and New Jersey defendants, and if they should bring suit in New York, to the same plea interposed by the New York and New Jersey defendants. It is for the reason that the rule respecting the necessity of having in all the parties whose presence is. essential for a complete settlement of the rights that the doctrine is modified when it appears that a person who should be a party is out of the jurisdiction of the court.

The text of Mr. Daniel’s work on Pleading and Practice, and the language of Lord Redesdale upon this point, appear in the opinion of Mr. Justice Dixon already mentioned. I think that the defendants who have refused to come in have no standing to ask for a dismissal of the bill.

I may remark, however, that the doctrine promulgated in the case of Minnesota v. Northern Securities Co., 184 U. S. 199, should not be applied to suits in the state courts, at least in this case in this court.

The motion is overruled.


author: Stevens, V. C.

text:
    The Borough of East Newark v. The New York and New Jersey Water Supply Company et al.
    [Filed May 25th, 1904.]
    On an interpleader bill it appeared that the city of Jersey City had made a contract, while it had a water-supply of its own, to supply another municipality — the borough of East Newark — with water for public and domestic purposes. Its own supply became unfit for use and so it contracted with the East Jersey Water Company for another supply, but for its own needs only. The East Jersey company furnished this supply, and also furnished a supply to the borough. The supply to the borough ran for a short distance through a pipe belonging to Jersey City. The East Jersey company charged Jersey City at the rate of $35 per million gallons, not only for so much water as Jersey City and its inhabitants consumed, but also for the water furnished the borough. Jersey City charged the borough at the rate of $90 per million gallons for the water it received. Although the contract between the borough and Jersey City expired in July, 1902, the arrangement was allowed to continue, without contract, until July, 1903, when the assignees of the Bast Jersey company notified the borough that it must pay the price of the water ($90) to them.— Held, that Jersey City, having neither the power to make a contract to supply another municipality with water not its own, nor an express contract which purported to do so, nor water of its own to furnish, could not recover the price of the water furnished to the borough. Held further, that although neither the East Jersey company nor its assignees had any express contract with the borough to furnish it with water, yet inasmuch as that company had actually supplied the water, and inasmuch as the borough had, in its interpleader bill, admitted its receipt and its liability to pay for it, the price of the water should be adjudged to belong to the company or its assignees. Held further, that out of the moneys brought into court, Jersey City was entitled to compensation for the use of its pipe.

      Mr. George L. Record and Mr. Robert Carey, for Jersey City.

      Mr. Herbert Boggs and Mr. Gilbert Collins, for the New York and New Jersey Water Supply Company and New Jersey Suburban Company.
   Stevens, V. C.

This is an interpleader suit. The borough of East Newark brings into court tire sum of $2,603.81, which it admits that it owes for water supplied to it between July 8th, 1903, and October 8th, 1903. The bill alleges that it is uncertain whether it owes the money to the city of Jersey City or to the New York and New Jersey Water Supply Company and the New Jersey Suburban Company, the two latter claiming jointly under an assignment from the East Jersey Water Company. Jersey City and these two companies, whom I will hereafter designate as such, have filed cross-bills, on a decree of inter-pleader, and the question is which has the better right to the money paid into court.

The facts are somewhat complicated and will have to be stated at length. In the 37ear 1885 Jersey City took "its water-supply from the Passaic river, at Belleville. It was pumped from the Passaic into a reservoir near the junction of Belleville turnpike and Kearny avenue, and from thence it flowed through pipes across the meadows to Jersey City Heights. In that year it made a contract with the town of Harrison to supply that town with water. To enable it to do so it was obliged to construct a twenty-inch main from one of its own mains in the Belleville turnpike through Kearny avenue, in Kearny township, that township lying between the turnpike and the town of Harrison.

In 1887 Jersey City made a contract with Kearny township to supply it with water for the term of ten years, at $90 per million gallons. This water was also supplied through the twenty-inch main. The contract, by its terms, expired July 12th, 1897. Prior to the expiration of this contract, and some time in July, 1895, the borough of East Newark was set off from Kearny township and became a separate municipality, but the inhabitants of the borough continued to receive, and Kearny township continued to collect for water as before, until March, 1897, when Kearny township notified the borough that the water supplied through its pipes to the borough would be discontinued after July 1st.

On July 1st, 1897, the borough made a contract with Jersey City for a water-supply, for five years, at $90 per million gallons. This contract, by its terms, expired July 1st, 1902. No other express contract between Jersey City and the borough was made until December 9th, 1903. This latter contract does not touch the present inquiry, because made after the water in suit was furnished.

If the foregoing were the only pertinent facts, of course the .money in court would belong to Jersey City. But there are other facts. Prior to the year 1895, the water taken from the Passaic at Belleville had become greatly polluted, and Jersey City began to look about for a new supply. The East Jersey Water Company had, prior to 1895, furnished a water-supply to the city of Newark, drawn from the Pequannock. By its contract with that city it was at liberty, for a certain time, to utilize the surplus water not required by Newark for its own inhabitants. So, in October, 1895, it made a contract with Jersey City for a temporary supply, to be delivered into the Jersey City mains near the junction of Belleville turnpike ■ and Kearny avenue. The contract was to run for one year from the time when the East Jersey companj'' should begin to deliver it, but it was stipulated that inasmuch as the company would have a surplus of Pequannock water to dispose of until September 24th, 1900, if Jersey City should not terminate the contract at the end of the year, its terms and conditions should continue in force up to September 24th, 1900, unless the city should terminate it by giving three months’ notice in writing. Under this agreement Jersey City at first received ouly a partial supply of water from the East Jersey company. Eor the residue it utilized, as before, its own works at Belleville. In the spring of 1898, however, the company commenced to make a full delivery. The East Jersey company was able to give this supply through its works at Little Ealls. It had by a supplemental 'agreement, dated April 2d, 1897, undertaken to furnish from the Passaic river, above the Great falls thereof, as much water as was needed to supplement the Pequannock supply. This agreement provided that the water company might, on two years’ notice, 'terminate the contract, and the company did, in October, 1900, give a notice that it would so terminate it on October 23d, 1902. Before this date, however, to wit, on March 31st, 1902, it made another contract with Jersey City to continue the supply until the Flynn contract was completed. This was a contract which Jersey City had made for the purpose of securing a permanent supply of water, to be drawn from the Rockaway river at or near Boonton. In June, 1903, work under this contract had progressed so far that the East Jersey company was able to connect its main with the new mains running through Kingsland at Upper Montclair, and thereafter the water was supplied to Jersey City through those mains. The old mains in Belleville turnpike running to Jersey City were abandoned. The water supplied by the East Jersey company to East Newark and Kearny continued to be supplied as before.

I lay out of view a contract which I have not as yet referred to — a contract, namely, between the East Jersey company and Kearny. The contract was made June 29th, 1895. It provided for a supply of water at the price of $90 per million gallons for fifteen years, commencing six months after its date. It did not go into effect, probably, because there was no main into which the company’s water could be delivered except the main owned by Jersey City. The time for the .delivery of the water under this contract with Kearny was twice extended, the first time by supplemental contract, dated February 14th, 1896, and the second time by supplemental contract, dated June 14th, 1898. But neither the original contract nor its two extensions was or is binding upon the borough of East Newark. It is well settled that when a borough is set off from a township the borough is not liable to a creditor of the township for previously contracted obligations. Lodi v. Hackensack Improvement Commission, 60 N. J. Eq. (15 Dick.) 229. The contract was in fact entered into only a few days before the separation of the two municipalities. Nothing was done, or attempted to be done, under it until July, 1903, and none of the parties to this controversy had up to that time treated it as in any way binding upon the borough. It may therefore be laid out of the ease.

At the time the third contract with Jersey City was made (March, 1902) the .situation was this:. Jersey City was getting all the water that it needed for itself from the East Jersey Water Company at the rate of $35 per million gallons. This water was then being delivered by that company into the Jersey City mains at Belleville. At the- same time the East Jersey company'was delivering water through a pipe of its own into the Kearny avenue main which belonged to Jersey City, for the use of Kearny township, the borough of East Newark and the town of Harrison. This water was charged to Jersey City by the water company at the same rate ($35) and Jersey City charged the three municipalities $90 per million gallons for it. This, as I said on a former occasion, appears to have been the result of a modus vivendi, brought about by the ownership by Jersey City of the main in Kearny avenue.

We come now to the questions at issue. They are the following: (1) Has Jersey City any legal right to sue East Newark for the water used by it? (2) Have the two companies any such right? (3) What are the equitable rights of the parties to the money paid into court?

(1) It seems to me plain, in the first place, that Jersey City has no legal right to the fund in court. In July, 1902, the time of the expiration of the written contract with East Newark, Jersey. City had neither the water to supply nor the power to enter into an agreement to supply it. It had, confessedly, no water of its own. Its original source of supply had been abandoned as unfit for use. Its new source of supply, the Roekaway river at Boonton, had not yet become available. The East Jersey company was furnishing all the water. And it did not at that time have the posyer to enter into a eoritraet with the East Jersey company to provide it with water for the use of East Newark. It is quite possible,' although the question is not before me for decision, that if Jersey City had entered into a valid contract' with an adjoining municipality at a time when it could have contracted, and if its own supply had temporarily failed, it could, for the performing of that contract, have contracted for a temporary supply. But that is not this case. The question here is whether it could contract with a water company not only for water for its own needs but also for water to be supplied to a municipality to which it was then under no contract obligation. I have not been referred by counsel to any legislation which vests a municipality with any such power — a power, as counsel for East Newark puts it, “to buy and sell water as a commodity.” If a municipality has a water-supply of its own, and this supply is more than sufficient for its needs, there is a very good reason for investing it with the power to sell this water to neighboring municipalities. Both are obviously benefited. The statutes referred to (P. L. of 1885; Gen. Stat. p. 655 § 940; P. L. of 1884; Gen. Stat. p. 2206 §§ 385, 389) do this, and the charter of Jersey City (P. L. of 1871 p. 1094 § 76) further authorizes it to distribute water. “through such portions of the counties of Hudson and Bergen as the inhabitants may desirein other words, to furnish water to individuals outside of the corporate limits. None of these statutes goes further.

Not only did Jersey City not have the right to contract with a water company for water in excess of its own needs, but the borough of East Newark had no right to enter into a contract for water with Jersey City. The Borough act of 1897 (P. L. of 1897 p. 323 § 76) only authorizes water contracts to be made with adjoining municipalities. It is admitted that the territory of the, borough does not adjoin or touch Jersey City.

But there is this further pertinent fact. Jersey Citjr, in its various contracts with the East Jersey company, did not attempt to contract for a supply of water which it might sell to other municipalities. The language of the contracts on this head is so clear that a discussion of their provisions would be superfluous.

It is an admitted fact that when the written contract made by Jersey City with East Newark, in 1897, which ran for five years, expired on July 1st, 1902, no other written contract was made.

The contention of Jersey City is this: Although Jersey City has no express contract with East Newark, yet she has an implied one, running from year to year, • which could only be terminated on one year’s notice. In support of this contention the case of Taylor v. Lamberiville, 43 N. J. Eq. {16 Stew.) 107, is relied on. I should doubt whether the authorities cited support the conclusion reached in that case; but, if sound, it is clearly distinguishable. There the municipality had the power to contract for gas, and the gas company was able and willing to supply it on the old terms. In the case at bar, a valid contract could not have been made, and Jersey City did not, at the time, have water of her own to furnish. The case comes within the authority of Hackettstown v. Swackhamer, 37 N. J. Law (8 Vr.) 191. In that case the treasurer of the town had given a note for monejr borrowed. Suit was brought upon the note, and the question was, in the words of the chief-justice, "whether a municipal corporation, in the absence of an express power for that purpose, can contract for loans for the supply of its ordinary expenses.” The question was answered in the negative, and it was decided that an action would lie neither upon the note nor upon an implied assumpsit based upon the fact that the municipality had had the benefit of the money. The principle of that case applies here, there being no power to enter into an express contract, and it being impossible to imply one. In the first place, although the contract between the East Jersey company and Jersey City expressly provided for water sufficient only for the needs of Jersey City, we would, contrary to the ordinary presumption which obtains in the case of a contract reduced to writing, have to imply a contract between the East Jersey company and Jersey City for an additional supply, to be furnished for the use of East Newark. Under such a contract, if binding, Jersey City would be legally liable to pay the contract price and, if necessary, to raise money by taxation to enable it to pay, if East Newark did not pay. In the Hachettstoton Case the court was asked to imply a promise where the town itself got the benefit. In this case the court is asked to go a step further and imply a promise where another municipality got the benefit.

But there is another difficulty. The contention is, not that the court should imply a contract agreeable to the tacit consent of the parties, which continued all the time that the benefit was being conferred, but that it should imply it in spite of the dissent of the company which actually furnished the water. The situation was this: The East Jersey company brought its own water in its own pipes to the main in Kearny avenue. This water flowed through the Kearny main to East Newark, where it was delivered to the inhabitants of that borough. This was, on its face, a delivery by the East Jersey company of its own water, and none the less so, because rightfully or wrongfully, with or without consent, a main that had been laid by Jersey City in Kearny avenue was used in its transmission. It is evident that if the title to the water was, in legal contemplation, during the course of its transmission, changed, it could only have been changed as the result of a contract. But no express contract was made, and to imply a contract which the parties were not legally authorized to enter into is impossible.

What happened in this case was that the East Jersey company rendered a bill for the water at the rate of $35 per million gallons, and that Jersey City paid it, and that Jersey City rendered a bill for the water to East Newark at the rate of $90 per million gallons, which East Newark also paid, the East. Jersey company, for reasons of its own, not objecting. In view of this situation can we deduce a contract for -a future supply which the parties could not terminate except on notice? The question answers itself. It is perfectly evident that there was no contract between the parties, legal or illegal. The arrangement was a mere modus vivendi. As it rested on no contractual obligation it continued no longer than the parties saw fit to continue it. When the East Jersey company said, we will no longer render to you bills for the water which we are furnishing to East Newark, that ended the matter, so far as Jersey City was concerned. They had no legal ground for insisting that the arrangement should continue.

(2) But in the second place, what legal right have the two companies to sue at law for the money? It is admitted that neither they nor the East Jersey company have any written contract with the borough. In the case of New Jersey Car Spring and Rubber Co. v. Jersey City, 64 N. J. Law (35 Vr.) 544, it appeared that Jersey City had the power to contract for the goods furnished, for whose price the suit was brought. These goods were actually- used in one of the departments of the city government, but they had not been ordered by the appropriate board, nor was it shown that they “had known of the requisition and the subsequent acceptance and use of the goods.” It was held that only in so far as that board had by resolution ratified their purchase could their price be recovered.

In this case, looking at the agreed statement of fact, which is not so full as it might have been on this branch of the matter, in connection with the bill of interpleader, it appears, with reasonable certainty, that the borough itself received the water. Where water supplied by a water company is used by the inhabitants of a town it is the inhabitants receiving it who are primarily liable Lo pay for it. It is only by a statute that a town becomes liable to pay for water used by individuals. The Borough act before referred to authorizes boroughs to make contracts for a supply of water not only for public but also for domestic purposes, the legislative scheme being that all the water shall be purchased by the borough itself and by it sold to its several inhabitants. The case agreed upon states that the borough has a system of distributing pipes and a schedule of water rates for water metered to consumers. The bill of inter-pleader states that in the year 1898 the borough entered into a contract with the mayor and aldermen of Jersey City for a supply of water for the necessities of its inhabitants for the term of five years, and that during said term, and up to the present time, so far as it has any knowledge, it has received, and is now receiving, such supply from said mayor and aider-men. This, I think, is an admission that all the water received has been received by the borough as such. It then goes on to state that it has been notified that the water which it is receiving belongs to the two companies, and if the borough uses it the two companies expect the borough to pay them for it; that it has boon sued by those companies; that it is unable to determine to whom of right the price of the water belongs; and that it has been and is ready and willing to pay the money to such person as shall be lawfully entitled to receive it.

It seems to- me that this explicit admission of the receipt of the water by the borough, and of its liability and willingness to pay for it, brings the case within the reason of the rule laid down in New Jersey Car Spring and Rubber Co. v. Jersey City, supra, and Cory v. Freeholders, 44 N. J. Law (15 Vr.) 445. The gist of a ratification is the deliberate admission by the proper authority of a liability to pay for that for which it may lawfully contract. If the borough says I will pay A or B, to one or the other of whom I admit I am liable, as the court may adjudge, this is as much a ratification — a formal acknowledgment of a liability to pay — as if it had said I promise to pay A, or I promise to pay B.

Eow, the proof is that the East Jersey company (or the two companies, its assigns) supplied the watér; that the borough received it in the expectation of paying for it; and that by coming into court with the money it has solemnly admitted that it owes it to that one of the parties to which the court shall adjudge that it belongs.

(3) But there is another question. Looking at the transaction as it really is, it is this: The water belonged to the East Jersey company. That company transmitted it for a long distance through its own pipes and for a short distance through a pipe belonging to Jersey City. It should, therefore, be paid the price of the water furnished. But it used the pipe of Jersey City as the only possible means of delivery, and-Jersey City has for years exacted a part of the whole price received for this rise. It has never given up its claim. Jersey City could, no doubt, in some form of proceeding, have asserted its right to compensation for the use of its pipe, or to an injunction restraining its use, either absolutely or except on equitable terms. Hence it would seem equitable that Jersey City should have a part of the money.

I think there is considerable doubt on the agreement of July 1st, 1903, made between the two companies and the East Jersey compan}-, whether anything was thereby assigned except the East Jersey company’s rights under the Kearny contract. It would seem from one of the exhibits — the water bill of January 7th, 1904 — that the East Jersey company may hare intended to assign its right as against the borough to the two companies, but the bill refers to the contract of July 1st, which affords but a doubtful title. In accordance with my suggestion that company has been made a party. If the East Jersey company concedes tire right of the two companies to the money, there will now be no difficulty in paying it out.

If the parties cannot agree upon the compensation to be paid to Jersey Git}', a reference should be ordered.


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    Robert G. Hazeldine v. Lucy C. McVey et al.
    [Filed June 25th, 1904.]
    R., being the owner of two lots, conveyed one of them to M., with a right of way over the other. P., who held a paramount mortgage on both lots, gave to M. a deed of release, purporting to “grant, release, quitclaim and set over-’ the lot conveyed, “together with the hereditaments and appurtenances thereto belonging,” but therein stipulating “that the rest of the lands in said mortgage specified may remain to the said party of the first part as heretofore.” On foreclosure — Held, (1) that the question whether the deed of release operated as a grant of a right of way out' of the estate of the mortgagee was a legal one; (2) that it did not, in fact, so operate, and (3) that the answer, therefore, did not set up any defence to the bill.
    On final hearing.

      Mr. William II. Speer, for the complainant.

      Mr. Winfield S. Angleman, for the defendants.
   Stevens, V. C.

On January 1st, 1894, Dan S. Eoberts and wife conveyed to John H. McVey a lot of land in Plainfield. The grantor owned an adjoining lot, and in his deed of conveyance to McVey he granted to him a right of way therein appurtenant to the lot conveyed. On January 2d, 1894, the Prudential Insurance Company, who held a mortgage on both lots, gave to John II. McVey a deed of release. The release purported to “grant, release, quit-claim and set over” the lot conveyed, “together with the hereditaments and appurtenances thereto belonging.” The question raised by the answer is whether by these Vords the deed of release operated to fasten the incorporeal hereditaments upon the interest and estate of the mortgagee in the lot not released against the express provision therein contained, “that the rest of the lands in the said mortgage specified may remain to the said party of tire first part as heretofore.”

It seems to me that the question thus raised is a-purely legal one. The bill is filed merely to foreclose the equity of redemption. The purchaser at the foreclosure sale will take the same-title that the mortgagee would have taken in a strict foreclosure. Gen. Stat. p. 385 § 72. This title will be that which the mortgagor gave to the mortgagee, stripped of all equity of redemption and modified only in so far as the mortgagee or his assigns by subsequent conveyances saw fit to modify it. The decree will be that the defendants “stand absolutely debarred and foreclosed of and from all equity of redemption of, in and to the said mortgaged premises when sold as aforesaid under this decree,” and the description of the premises to be sold will be that contained in the mortgage itself, excepting thereout such part thereof as may have been released by the release of January 2d. Where there arc questions of legal title in dispute it is not the province of a foreclosure suit, under our system of jurisprudence, to settle them. Its appropriate end is to bar the equity of redemption. Questions of title arising after foreclosure must be settled by a judge and jury in a court of law.

With this view of the matter it may seem out of place to express any opinion on the merits of the question raised. As, however, the argument was confined to the merits it may not be altogether improper for me to say that I cannot see how that force can be given to the word “appurtenances” which counsel for the defendant contends for. There are two distinct estates involved, that of the mortgagor and that of the mortgagee. Their characteristics are fully described in the recent case of Colton v. Depew, 59 N. J. Eq. (14 Dick.) 126; 60 N. J. Eq. (15 Dick.) 455. It would seem quite clear that when the owner of the equity conveyed to McYey and gave to him the easement in question he affected, and could only affect, his own estate. He could not'in anywise affect the paramount legal estate already subsisting in the mortgagee. When, on the other hand, the mortgagee released, he dealt with his estate, viz., the paramount legal estate, and the question is whether he intended to subject that estate to the easement. If he did, he must have newly created such an easement in the estate which he held, for it did not exist, so far as he was concerned, before. It is perfectly well settled that a right of way will not be created by the mere use of the word “appurtenances.” Stuyvesant v. Woodruff, 21 N. J. Law (1 Zab.) 133; Fetters v. Humphreys, 16 N. J. Eq. (4 C. E. Gr.) 471. This being so, there is nothing in the deed of release upon which to contend that the easement existing in the equity of redemption was extended to the legal estate belonging to the mortgagee. The easement was, indeed, subsisting at the time the release was given, for it had been created the day before; but it was an easement attached, and attached only, to the equity of redemption- — -to the estate of the mortgagor, and with this estate the mortgagee had no concern. It does not appear that he had any notice, either actual or constructive, of the existence of this easement. To assume that he had it and that he intended to enlarge the easement in such a way as to fasten it upon his own estate would be not only unwari’anted in legal theory but unjust. The very language of the release “that the rest of the land in the said mortgage specified may remain to the said party of the first part as heretofore,” would seem to indicate that the mortgagee intended to retain to himself what he had not in terms and by unambiguous description parted with.

On either grounds I think defendants’ answer does not interpose a partial defence to complainant’s bill.


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    Mary L. V. B. Thompson, administratrix, v. Elizabeth L. North et al.
    [Filed October 6th, 1904.]
    1. If a defendant submits to answer he must answer fully, and not only as to his knowledge of each fact charged; he must answer if he have no knowledge, as to his information and belief regarding it.
    2. An unqualified admission on information and belief will dispense with proof of the fact- alleged.
    3. A defendant is not, in answering, required to obtain information, not in his own or his agent’s possession.
    On exceptions to answer.

      Mr. Edward 8. Atwater and Mr. Thompson, for exceptant.

      Mr. James E. Howell, contra.

   Stevens, V. C.

The rules to be applied are entirely settled. They are these: If a defendant submits to answer he must answer fully. A general denial will not suffice. He must answer each material allegation of fact charged in the bill. And he must answer not only as to his knowledge of each fact so charged, but also, if he have no knowledge, as to his information and belief regarding it. And it will not be sufficient for him to answer merely as to his' information; he must also state his belief. Of course, if he has no information outside of the statements of the bill he is not required to state his belief of those statements. If he has information from any other source than the bill, and has any belief grounded thereon, he must state such information and belief. Story Eq. Pl. § 854; King v. Ray, 11 Paige 236; Woods v. Morrell, 1 Johns. Ch. 103; Reed v. Cumberland Insurance Co., 36 N. J. Eq. (9 Stew.) 146. The reason is “that whatever allegations of fact the defendant does not choose directly to deny, but states his belief thereof, amounts to .an admission that it is true, or that he does not mean to put it in issue as á matter of controversy in the cause.” Brooks v. Byam, 1 Story Rep. 296. As it is tersely said in some' of the eases, what the defendant believes the court will believe. An unqualified admission on information and belief will' in general dispense with proof of the'fact alleged. Dan. Ch. Pr. (6th Am. ed.) *840; Tayl. Ev. § 737.

There is another rule of pleading applicable to this controversy and that is this: that a defendant, with regard to transactions that are not his own, is not bound to find out information for the purpose of communicating it to complainant. Christian v. Taylor, 11 Sim. 404. “A defendant,” says Chancellor Kent in Morris v. Parker, 3 Johns. Ch. 300, “ought not to be required to obtain information [that is, information neither in his own possession nor in his agent’s, as to which latter see Earl of Glengall v. Frazer, 2 Hare 99, and Vreeland v. New Jersey Stone Co., 25 N. J. Eq. (10 C. E. Gr.) 140] so as to meet the plaintiff’s wishes and thereby become his agent to procure testimony.”

With these rules before us the solution of the case is easy.

The first exception is overruled. The defendants are asked, apparently, to admit, not certain paragraphs of the will set forth in here verba, but its legal construction.

The second and third exceptions are sustained. The answering defendants are so situated that they probably have both information and belief as to the facts specifically charged. The complainants arc entitled to a specific answer as to their information and belief in reference to each of these facts. If the}' have no information or belief they must say so.

The fourth exception is sustained. The answer to the paragraph herein mentioned is not only too general but it does not state defendants’ information and belief.

The fifth exception is overruled. So far as not answered it only states complainant’s view of the law.

The sixth exception is sustained. The answer is not sufficiently specific and it does not state defendants’ information and belief.

The seventh and eighth exceptions are sustained. If defendants have no knowledge of the value of the stock, they must say what their information and belief is, if they have .any. The same remark applies to the statement concerning the finan-' cial straits of Ellen and Joseph Knowles and of Mrs. Lore’s knowledge thereof.

The ninth exception is sustained in so far as it relates to Anna .Julia McGrew. She should either have admitted or denied that any statement was made to her by Ellen Knowles. The answer of Elizabeth North is, perhaps, formally defective in not stating that the statement made to Mrs. Lore in her presence was the only statement made to her or in her hearing on the subject..