author: Bergen, V. C.

text:
    George F. King v. American Electric Vehicle Company.
    [Filed December 12th, 1905.]
    Under P. L. 1901 p. 91, making every corporation liable to a franchise tax unless its annual return shows that it is within the exempted class, the receiver of an insolvent corporation must pay the tax, where no return has been made, even though prior to the year for which it was assessed he had converted all the corporate property into cash and no business was thereafter carried on by it. The imposition is laid without regard to the exercise of a franchise, but solely as a condition of its continued existence.
    On petition of receiver for directions as to payment of franchise tax.

      Mr. John R. J-Iardin, for the petitioner.

      Mr. Robert II. McCarter, attorne3r-general, for the state.
   Bergen, V. C.

The defendant company was organized under the laws of this state, and from the date of its incorporation was a manufacturing company with at least fifty per cent, of its capital stock invested in a manufacturing business carried on within this state. It was incorporated in 1899, and each year thereafter, to and including the year 1902, having made to the state board of assessors a proper return, no franchise tax was assessed against the corporation- On the 23d day of September,-1902, the corporation, under proceedings taken in this cause, was adjudged to be insolvent, and Charles J. Eoe, the petitioner, was appointed receiver in the manner provided by the General Corporation act of this state. Before the close of the year 1902, the petitioner, as receiver, had converted all of the property of the insolvent corporation into cash, and thereafter no business of any kind was carried on by said corporation or by the petitioner as its receiver in its behalf, yet no steps have been taken to procure the legal dissolution of the company, so that its corporate existence is still preserved. No return for the purposes of assessment for the franchise tax was made, either by the corporation or by the receiver for it, for the year 1903, in the absence of which the state board of assessors levied an annual license fee or franchise tax ágainst the corporation for that year, and the state now demanding its payment, the petitioner requests the direction of this court as to his duty in the premises.

It is admitted that the funds in the receiver’s hands are insufficient to pay the debts of the corporation, the amount of the fund being $14,042.97, which will be reduced to the extent of $4,000 if the franchise tax be directed paid, while the amount of the debts proven, including preferred claims, is $26,076.56. The customary form for the making of a return for the purposes of assessing the state franchise tax for the year 1903 was mailed by the state board to the registered New Jersey agent of the defendant corporation. The form was mailed to him in March, 1903, at which time he was absent from the country, and did not return until the month of June of that year, and for that, or some reason not known, the form never came under his notice. No form for a return for the -purposes of such an assessment was sent to the petitioner, nor did one reach him from any source, and no appeal from such assessment was ever taken by the receiver or the corporation.

The claim which the receiver now makes on behalf of the creditors of this insolvent 'corporation is that, as it was a manufacturing corporation, the assessment would not have been made if a proper return of the character of the business of the corporation and the fact oE its insolvency had been made to the state board; that the policy of the lawmaking power of the state is in favor of fostering manufacturing companies, and that the omission to make the return upon which the state board allows the exemption should not be permitted to overthrow this beneficent policy. With a desire to give effect to this liberal intention, I have sought for some logical reason upon which to rest a conclusion favorable to the claim of the petitioner, but have not been able to discover one. The act under which franchise taxes are levied, as amended (P. L. 1901 p. 31), enacts that all corporations, other than those which are subject to the payment of a state franchise tax based upon gross receipts, shall make an annual return to the state board, which shall contain the amount of the capital stock of such corporation issued and outstanding on the 1st day of January preceding the making of said return, on or before the first Tuesday in May in each year, and tiren declares that all corporations shall pay an annual license fee or franchise tax on such capital stock in the manner and to the extent stated in the act. The act further provides that it shall not apply to certain corporations, of which a manufacturing company is one, where at least fifty per cent, of its capital stock issued and outstanding is invested in that business carried on within this state, provided the corporation entitled to the exemption shall have stated in its return where the manufacturing establishment is located, the character of the goods manufactured, the total amount of its capital stock, and the amount of capital stock actually employed in New Jersey in carrying on such manufacturing business. It thus appears that all corporations are liable to the tax, unless its annual return shall disclose that it is within the exempted class.

It lias been determined by our court of errors and appeals that the assessment to be made against the franchise of a company incorporated under the laws of this state is an arbitrary imposition laid without regard to the value of its property or its franchises, or whether it exercises the latter or not,'and is imposed solely as a condition of its continued existence, and that without regard to solvency or insolvency. In re United States Car Co., 60 N. J. Eq. (15 Dick.) 514.

The defendant company had a corporate existence in 1903. It made no return and took no steps to put itself in a position to have the benefit of the proviso contained in the act of 1901, and so far as the state board of assessors had knowledge, it fell within the class described in the act as “all corporations incorporated under the laws of this state.” In Hardin v. Morgan, 70 N. J. Law (41 Vr.) 484, and affirmed by the court of last-resort, 71 N. J. Laio (42 Vr.) 342, it wras adjudged that “four things at least are now necessary to secure exemption from th'e state franchise tax. First. That at least fifty per cent, of the capital stock of the compa^-, issued and outstanding on January 1st next preceding the annual return, shall be invested in manufacturing carried on within this state. Second. That the annual return to the state board of assessors shall state where the manufactory is located, and the character of the goods manufactured. * * * The right to exemption is a matter of grace which the statute confers upon a compliance with its requirements. It is essential, to secure the exemption, that it shall be applied for within the time and in the manner pointed out by the statute, otherwise the exemption is lost.”. In the case just cited, the company was a manufacturing corporation, and would have been entitled to the exemption if the proper return had been made. As in the United States Car Co. Case, supra, it was held that neither the levying of the assessment after the appointment of the receiver nor the fact of insolvency in any way affected the right of the state to the franchise tax so long as the company continued in existence, and as it has also been determined in Hardin v. Morgan, supra,'that the making of the return is a prerequisite to exemption, I am of the opinion that . the eases last cited must control the one under consideration, and that as this corporation was subject to a franchise tax or license fee unless it made the return required by law, the assessment was properly levied, and the receiver will be so advised.


source: Caselaw Access Project

author: Bergen, Y. 0.

license: Public Domain

text:
    The Trenton Trust and Safe Deposit Company, administrator, &c., v. Mary Frances Armstrong et al.
    [Decided December 12th, 1905.]
    A will provided that upon the decease or marriage of testator’s widow the estate should go to testator’s three unmarried daughters, so long as they should remain unmarried, and in case they “all” should marry it should be equally divided between testator’s five children or the issue of deceased children.—Held, (1) that the daughters took the use of the fund during the time they remained unmarried as joint tenants, with right of survivorship between them, and so long as any of the daughters remained alive and unmarried the trust continued for their benefit, although others had died unmarried, so as to make it impossible that “all” should ever many; (2) that the remainder over to the children in the corpus of the estate became vested on the death of the testator and will take effect in possession upon the determination of the life estate of the three daughters by the death or marriage of all of them.
    On bill for construction of will and direction to trustees.

      Mr. James Buchanan, for the complainant.
   Bergen, Y. 0.

The complainant, as trustee, and also as ancillary administrator with the will annexed, of Ephraim W. Blackwell, deceased, having in hand a trust fund, part of the estate of said decedent, has filed this bill ior directions as to the manner in which it shall execute the trusts created by the will of its testator.

The complainant has in hand about $2,000, which it holds subject to the trust, if any, arising from the proper construction of the following paragraphs appearing in the will of the deceased, viz.:

“Item. I give, devise and bequeath the net rents, interest and income of all my estate real, personal and mixed whatsoever and wheresoever of which I may die seised, possessed or entitled, unto my beloved wife Sarah Ann Blackwell, for and during the term of her natural life, provided she so long shall remain my widow, single and unmarried, but not otherwise; she paying all charges and taxes against said real estate.
“And emmedately upon the decease of intermariage of my said wife which shall first happen, I give, devise and bequeath unto my three unmarried daughters, Sarah Elizabeth Thompson, Emily Blackwell and Florence Blackwell, so long as they remain unmarried, to have all my property so long as they remain unmarried, in case they all marrying, to be equally divided between my five children, Mary Frances Armstrong, Sarah Elizabeth Thompson, Emily Blackwell, Theodore J. Blackwell, and Florence Blackwell, or the lawful issue of the same as shall then be decased or their their respective heirs, administrators, and executors or assigns forever so nevertheless that such issue take and receive such part and share only as his, her or their deceased parent would have taken if then living.”

The widow, and Sarah, one of the three unmarried daughters’ are dead. Emily and Florence, two of the three daughters described in the will as unmarried, are still living. Sarah died after the testator without leaving issue, never having been married. Beside these three daughters the testator left a daughter, Mary Frances Armstrong, the wife of James 0. Armstrong— she is still living-—and a son, Theodore, who- survived the testator, and died leaving three children. These persons are all of the parties interested in the present or future distribution of this fund. They have all been made parties defendant to this suit, and for want of answers, a decree pro confesso has been taken against them.

The doubt as to its duty in the premises which the complainant suggests arises under the claim made by the two unmarried daughters that they are entitled to the whole of the income as survivors of their sister Sarah, and that such right will continue to the unmarried sister should either of the present survivors marry or die, and that no distribution of the corpus of the fund can be made while either of the three live unmarried. Against this claim, is the insistment on behalf of the children of Theodore that the three unmarried daughters took only an interest which was to be divested upon the death or marriage of either, and that upon the death of Sarah they became entitled to an immediate distribution of the whole fund between them, representing their father, and their aunts, Florence, Emily and Mary. The intentions of the testator are so inartistically expressed in his will as to make it difficult to clearly ascertain and define them according to well-settled rules of construction, but it seems to me that the dominating purpose of the testator was to provide for the comfortable support and maintenance of such of the women of his family as were unmarried and dependent upon their own exertions for support. His estate was small, and he devotes its income at first to the support of his wife during her widowhood. After this purpose is served the income is to be devoted toward the maintenance of such of his daughters as remained unmarried, and when all were married, the preference was to cease and the fund divided equally among all the children, because in the mind of the testator they had then reached a common level, and my understanding of this bequest is that it was the testator’s intention that the fund was to remain undistributed and the income applied to the use of any of the daughters unmarried until all were married, or the happening of some event which precluded the possibility of the fulfillment of the condition. The time fixed for the distribution is when all are married. The death of one unmarried makes it impossible to have this condition met if the word “all” is to be applied collectively to the donees as a class, and my interpretation of this clause is that the word “all” applies only to so many of the class as remain capable of marrying; that the death of one does not destroy the trust because fill of the class cannot marry, but it continues for the benefit of the remaining beneñeiaries so long as any of them are alive and unmarried. The class may be diminished by death or marriage, but it is not extinguished so long as one of them lives and continues within the description of those for whose benefit the trust was created. The devise is to three unmarried daughters so long as they remain unmarried, with remainder over in the event of "all marrying.” It is a legacy given to two or more persons by name without words indicating an intention to confer distinct interests, and the three daughters take the use of the fund during the time they remain unmarried as joint tenants with right of survivorship. Noe’s Administrator v. Miller’s Executors, 31 N. J. Eq. (4 Stew.) 234, 236; Gordon v. Jackson, 58 N. J. Eq. (13 Dick.) 166, It therefore follows that the complainant, as trustee, should hold the trust fund so long as any one of the three daughters remains unmarried, and pay the income to all retaining the qualification established by the testator.

A provision made for the support of daughters as long as they continue unmarried and need support, where the evident intention is not to restrain marriage, but to provide support, is a valid bequest. Graydon’s Executors v. Graydon, 23 N. J. Eq. (3 C. E. Gr.) 229, 237.

On the argument the attention of the court was called to the fact that Sarah Elizabeth Thompson, one of the three daughters, being a widow, did not properly fall within the description "unmarried,” but this condition does not change the situation. She was a widow at the time of the making of the will, and as the testator expressly names her as unmarried, we must adopt the evident intention of the testator and give to this word a secondary and perhaps a less-accustomed meaning, which is; “not being married' at the time in question,” that time here being the making of the last will.

The next question presented is, Has the testator made any disposition of the corpus of his estate? The gift over, as expressed by the testator, is to take effect when all of the three unmarried daughters are married, and it is insisted that the. gift of the corpus is liable to take effect or to be defeated by the occurrence or non-occurrence of an uncertain event, viz., the marriage, not of one, but of all of these unmarried daughters, and therefore falls within the definition of a conditional legacy, and as one of the daughters died unmarried, the condition upon which distribution depends can never happen, and that therefore the testator died intestate as to the corpus. In my judgment, this insistment has not the sanction of the true rules of construction to be applied to a case of this character, and I am of opinion that the testator intended to create, and under well-established rules for the construction of wills did create, an estate for life, which was subject to an earlier termination upon the marriage of all of his then unmarried daughters, and that the remainder over takes effect on the determination of the preceding estate, whether by death or marriage, and, that although the bequest over is, in terms, made payable upon the marriage of the life tenant, it is to be extended by implication so as to take effect on the determination of that estate, whether by death or marriage.

What the testator undoubtedly intended was a provision for his unmarried daughters during their maidenhood, even if that condition continued until their death, and in the event of the destruction of that previous estate, either by marriage or death, then the corpus of the fund was to be divided among his living children, which might include these three daughters if the determination of their life estate had been caused by marriage, and also among the issue, per stirpes, of any of his children who might have died before the determination of the previous estate. This construction has the authority of well-adjudged cases. In Eaton v. Hewitt, 2 Drew. & S. 184, 192, the court said: “It is a rule now well established that where a testator gives to a woman a life interest if she so long remains unmarried, and then directs that in the event of her marrying the property shall go over to another, although according to the strict language the gift over is expressed only to take effect in the event of the marriage of the life tenant, the gift over is held to take effect even though the tenant for life does not marry.”

In Browne v. Hammond, Johns. Ch. (Eng.) 210, where the gift was to the wife so long as she should remain the testator’s widow, without being expressly for her life, the court held that it was concluded by the authorities “which have determined that a devise or bequest over, though in terms made upon the marriage of the donee of the preceding estate, is to be extended by implication so as to take effect on the determination of that estate by death.” This case was cited with approval in Underhill v. Roden, 2 Ch. Div. 494.

The result I have reached is that the gift over of the corpus of this fund creates a vested interest, which took effect on the death of the testator, subject to the estate of the -widow, which has now been disposed of by her death, and also subject to the joint estate of the three unmarried daughters during their maidenhood, or life if they never marry.


author: BERGEN, Y. C.

text:
    The Board of Home Missions of the Presbyterian Church in the United States of America et al. v. M. Eva Davis et al.
    [Decided December 14th, 1905.]
    1. The issuance of a writ of assistance rests in the sound discretion of the court, and such writ will never be awarded in a case of doubt, nor will a question of legal title be tried or decided in proceedings looking to the exercise of the power of the court to put a purchaser in possession.
    2. Where a defendant in a foreclosure suit purchases a paramount title after the decree for sale in the suit, such defendant stands in the same position as a stranger who purchases an outstanding title and enters into possession, and will not be ousted from possession by a writ of assistance.
    On petition for writ of assistance.

      Mr. George M. Shipman, for the petitioner.

      Mr. Martin Wyckoff, for the defendant M. Eva Davis.
   BERGEN, Y. C.

William Davis mortgaged certain lands in Warren county, in this state, to the complainants, who instituted proceedings against the heirs-at-law of Davis, he having died intestate, to foreclose the equity of redemption. This defendant M. Eva Davis, who was one of the heirs-at-law of William Davis, set up as a defence in the foreclosure proceedings that her father, William Davis, had no title to the premises when he gave the mortgage, hut this defence was overruled, and a decree was made directing the sale of the land to raise the mortgage debt, following the rule laid down in State Mutual Building and Loan Association v. Batterson, 65 N. J. Eq. (20 Dick.) 610, 612. The sale was made by the sheriff of Warren count)r, duly reported and confirmed, and a deed, executed by the sheriff in due form, was delivered to the petitioner, who now presents his petition for an order for possession. The usual formalities upon which such an application may be based have been observed, and the only opposition to the making of the order rests upon the allegation that the occupant is now in possession under a title superior to that vested in the mortgagor and now held by the petitioner by virtue of the foreclosure sale.

The answer to the petition is in the form of an affidavit, made by the occupant, which sets forth the facts upon which resistance is founded, and while open to the objection that it is not in form an answer, this was not urged against it on the argument, and the petitioner consented to treat it as an answer, and also admitted, upon being offered an opportunity to submit answering testimony, that he could not successfully deny the facts stated. In this situation I must take the facts disclosed by the papers to be true. The petition is in usual form, setting forth the issuing of the execution; a description of the lands, the possession of the defendant, who was a party to the foreclosure proceedings; the exhibition of the sheriff’s deed to her, with a demand for possession, and her refusal. The affidavit presented by the defendant by way of answer shows that one- Mary Weller, a lunatic, died intestate in 1879, seized of tire lands; that she had never married, and left as her only heirs-at-law collateral relatives, some of whom entered into possession of the lands; that since the decree foreclosing the equity of redemption under the mortgage given by William Davis was made in this cause the defendant purchased, by good and sufficient conveyances, the title which some of these collateral heirs had in the premises, and charges that she now holds possession under such conveyances, so far as they have passed the title, and as a tenant in common with such of the heirs as have not conveyed to her.

Under the proofs now before me I must assume that the title of the defendant is paramount to that acquired by the petitioner in the foreclosure proceedings, for the answer alleges that Mary Weller died seized and intestate, and charges that the title of William Davis under which the petitioner claims is based upon a pretended devise from Mary Weller, which could have no lawful existence, because she died intestate, and as these claims are not disputed, it would appear that William Davis had no title to the lands which he mortgaged, unless he has acquired one in some other manner, not disclosed in these proceedings. The only question I am called upon to consider is whether an order for possession, such as usually follows the result of a foreclosure sale, ought to be allowed against a defendant in foreclosure proceedings who seeks to hold possession under a title confessedly superior to that of the purchaser at the foreclosure sale when .such paramount title was acquired after the decree was entered foreclosing the equity of redemption and directing a sale.

The writ applied for is intended to aid in the execution of a final decree, in order that a purchaser may have the benefit of his purchase, but it will never be awarded in a case of doubt, nor will a question of legal title be tried or decided in proceedings looking to the exercise of the power of the court to put a purchaser in possession. Schenck v. Conover, 13 N. J. Eq. (2 Beas.) 220; Thomas v. De Baum, 14 N. J. Eq. (1 McCart.) 37, 41; Barton v. Beatty, 28 N. J. Eq. (1 Stew.) 412.

According to the settled rules of law relating to this subject, it would not be seriously asserted that if a stranger, not a party to the foreclosure proceedings, had purchased this outstanding title, and entered into possession, this court would undertake, in the summary manner proposed, to settle the legal rights of the parties. But it is insisted by the petitioner that because this defendant was a party to tire foreclosure proceedings she is now estopped from asserting a title against the purchaser which she derived from an independent source having no relation to the mortgagor’s title, and acquired after the making of the decree in which the rights and estates of the parties claiming under William Davis, the mortgagor, had been passed upon. In support of this contention the petitioner’s counsel relies upon Chadwick v. Island Beach Co., 43 N. J. Eq. (16 Stew.) 616, but clearly that ease does not afford the petitioner any effective support. In the Chadwick Case it appeared that the defendant had acquired the independent title it relied upon before the filing of the foreclosure bill, and in passing upon this question, Chief-Justice Beasley said: “When a complainant alleges that he holds a mortgage in fee upon certain lands, and prays that a sale shall be made.of such property, such a claim seems, proprio vigore, to include, inferentially, an assertion that a title paramount to such mortgage does not reside in any of the parties to the suit. By such an assertion the defendants are called upon to admit or deny the existence of such lien upon the property, and plainly, if such lien exists, none of them can have a title superior to the right asserted in the bill.” In that case it also appeared that the defendant company took its conveyance subject to the conditions contained in the mortgage, and it was held that it was not entitled to retain the possession against the rights of the mortgagee, which it had covenanted to respect.

The conclusion I have reached’is that the defendant, by purchasing a paramount title after the filing of the bill of foreclosure and the making of the decree for the sale of whatever equity she might have in the property, stands in the same position as a stranger when the title which she has acquired proceeds from a source entirely distinct from that through which the purchaser under the foreclosure claims, and with which she was not vested when called upon to answer, and that the decree could not affect any rights which she did not possess when it was made. The exercise of the power to make this order rests in the sound discretion of the court, and is “only used when 'the right is clear and when there is no equity or appearance of equity in the defendant.” Vanmeter v. Borden, 25 N. J. Eq. (10 C. E. Gr.) 414. A very serious question may arise upon full proofs as to where the legal title to this property rests, and should not be disposed of in this summary way. The petitioner should be required to establish his title in a proceeding directed to that end.

The petition will be dismissed and the order refused, with costs.


text:
    William R. Whitehead et al. v. American Lamp and Brass Company.
    [Decided December 29th, 1905.]
    1. Where a letter of guaranty was dated August 1st, 1903, and recited that the writer would guarantee the payment of “any future purchases during this year,” the guaranty should be construed as limited to the remainder of the year 1903.
    2. Where a private corporation enters into a contract in excess of its granted powers, but not expressly prohibited, and has received the benefits contracted for, it will be estopped to plead a want of power to make the agreement for the purpose of escaping performance on its part.
    On appeal from receiver’s order disallowing claim.

      Mr. Edwin G. Long, for the appellant.

      Mr. Frank S. Katzenbach, Jr., for the receiver.
   Bergen, V. C.

The Clark Brothers Glass Manufacturing Company, a partnership, was engaged in the business of manufacturing glass and assembling parts of lamps, with which they made the completed article. The lamps were made for the insolvent corporation, which had been organized under the laws of this state, and carried on its business in the c^ of Trenton.

The Eostoria Glass Company, prior to August 1st, 1903, had sold to the Clark Brothers Company a considerable quantity of goods, and applied to its debtor for a guarantee of the pa3rment, not only of the amount due, but of all future purchases by the Clark Brothers Company. In reply to this application, which was referred to the defendant company, it wrote to the Eostoria company the following letter, signed by its proper officers:

“Trenton, N. X, August 1st, 1903.
“Eostoria Class Company, Moundsvüle, West 7a., W. A. 7. Dalzell.
President:
“Dear Sir—The Clark Bros. Glass Manufacturing Company of Elwood City have referred to us your letter of July 30th regarding your account against them, and as the goods which they buy of you are used in the manufacture of lamps for our account, we are willing to guarantee to you the ultimate payment of all purchases from you up to date, as well as any future purchases during this year, regardless of whether the account is an open one or has been closed by their note.
“As this letter is a standing guarantee covering all transactions, it will obviate the necessity of endorsing' any note sent you from time to time so that settlement need not be referred to us for specific guarantee in each instance.”

The appellant company shipped to the Clark Brothers Company goods as ordered by them until the month of February, 1904, when that partnership was declared insolvent and an assignee appointed for them in the State of Pennsylvania, and about the same time the defendant in this cause was declared to be an insolvent corporation, and Bobert S. Woodruff was appointed its receiver by this court. At the time of the insolvency of the Clark Brothers Company it was indebted to the appellant in the sum of $5,229.52, and it is for this debt that the claim of the Eostoria Glass Company was presented to the receiver of the defendant company, payment being claimed from it based upon the guaranty alleged to be contained in the foregoing letter. This claim the receiver has rejected, and from such determination this appeal has been taken.

The Clark Brothers Company and the defendant company kept separate books of account, and at the time of the adjudication of insolvency of the Clark Brothers Companj' the def endant company was their creditor to an amount exceeding $27,000.

That the power to guarantee the payment of the past and accruing indebtedness of a third party is not within the chartered powers of the insolvent corporation is the ground upon which the receiver bases the disallowance of this claim. Whether an indemnity to one who-is to furnish material to another for the purpose of being used in the manufacture of goods for the account of the guarantor is beyond the corporate powers of a manufacturing company organized under the laws of this state it is not necessary here to determine, because I am of the opinion that the corporation is estopped from setting up the plea of ultra vires to so much of this claim as accrued during the year 1903, after August 1st, the date of the guaranty. The written indemnity is limited to “any future purchases during this year," the proper interpretation of which is “during the year 1903.” The guarantee of payment of past indebtedness was without any consideration to the guarantor, so far as this case shows, and such action was plainly beyond the purposes for which the corporation was organized, as it does not appear that it received any benefit or consideration. A different rule might be applied if it appeared that the future conduct of the business of the guarantor depended upon the furnishing of goods which could only be had from a vendor who refused to supply unless his accrued account was made secure by a guaranty, and that such continued supply was necessary to save the business of the guarantor from ruin, but such a condition is not shown to exist in this case, and no opinion is required or expressed on this point.

My conclusion is that so much of this claim as accrued before August 1st and after December 31st, 1903, is not provable against the insolvent estate and should be eliminated, and that the residue of the claim should be allowed.

The defendant company was engaged in a manufacturing business, to carry on which certain articles were being manufactured for its account by the Clark Brothers Glass Company, to produce which the materials furnished by the claimant were essential. They could not be had from the claimant without the guarantee of the defendant company, which was given for the purpose of continuing its own business, and resulted in a direct benefit to it in the prosecution of the business it was chartered to carry on, and if th’e act of guaranty was beyond its expressed powers, it is not prohibited by the Corporation act of the state under which it was organized. Still, if the act was in excess of its authority, it having induced the claimant to part with its property relying upon the promised “ultimate payment," and being benefited by having the material manufactured for its account, it would be unconscionable to now permit it to interpose the plea it offers. The weight of modern judicial authority favors the rule that where a private corporation enters into a contract in excess of its granted powers, but not expressly prohibited, and has received the benefits contracted for, it will be estopped from pleading a want of power to make the agreement for the purpose of escaping performance on its part.

The strict rule applied to a quasi public corporation to prevent it from doing an act which may disqualify it from discharging its duties to the public is not enforced as to private corporations to such an extent as to permit them to do an injustice. Bowman v. Foster & Logan Hardware Co., 94 Fed. Rep. 592. In Chicago, Rock Island and Pacific Railway Co. v. Union Pacific Railway Co., 47 Fed. Rep. 16, Mr. Justice Brewer, referring to such a distinction, said: “But a milder rule applies when a corporation seeks to repudiate a contract into which it has formally entered. It is not seemly for a corporation, any more tiran for an individual, to make a contract and then break it; to abide by it so long as it is advantageous and repudiate it when it becomes onerous. The courts may well say to such corporation : ‘As you have called it a contract, we will do the same. As you have enjoyed the benefits when it was beneficial, you must bear the burden when it becomes onerous.’"

The principal cases bearing upon the question of ultra vires are considered in Camden and Atlantic Railroad Co. v. Mays Landing, &c., Railroad Co., 48 N. J. Law (19 Vr.) 530, and its application to quasi public and private corporations distinguished in an exhaustive opinion by Mr. Justice Yan Syckel, who, speaking for the court of errors and appeals, said: “The true rule is that when the transaction is complete, and the party seeking relief lias performed on his part, the plea of ultra vires by the corporation, which has acquiesced in it, is inadmissible in an action' brought against it for not performing its side of the contract in all those instances where the party who has performed cannot, upon rescission, be restored to his former status.”

The right of a manufacturing company to loan its credit for the express purpose of fostering its legitimate business is sustained, in Holmes v. Willard, 125 N. Y. 75, 81, by Judge Earl, as follows: “A corporation dealing in manufactured goods, and needing them for sale, may, as a proper incident to its business, extend financial aid to a manufacturer by advancing him money to enable him to. furnish the goods. This aid may be extended by a loan of its own money, or it may take his .notes, and by its credit raise money thereon and advance such money, looking for reimbursement out of goods to be manufactured and delivered to it.”

The rule thus laid down is properly applicable to this case, for here the defendant loaned its credit to a manufacturer in order to enable it to procure goods to be manufactured for the defendant’s account, and the loan of its credit can be.as well justified as the loan of its money when used to advance its legitimate business.

It has not been shown that either the directors or stockholders of this corporation were ignorant of the fact of the guarantee upon which the claimant relied, and it is therefore “the just inference” that the directors and stockholders had so far acquiesced in the action of its officers as to bring the act of indemnity within the business of the corporation. Holmes v. Willard, supra.

The receiver will be advised to allow as a claim against this insolvent corporation so much of the indebtedness guaranteed as arose during the year 1903, after August 1st, and only so much of the interest items as relate to that part of the account which falls within those dates. If the parties cannot agree as to the proper amount to which the claim should be reduced, a reference to a master may be taken. As the claimant has oply succeeded in part, no costs will be allowed.


author: Bergen, Y. C.

text:
    Louisa Harris v. Daniel Harris.
    [Decided January 12th, 1906.]
    1. Costs and counsel fees in divorce cases are not allowed as a matter of right, and awarding them is- usually within the discretion of the court.
    2. Where a wife files a bill for alimony without being able to prove-the facts upon which the jurisdiction of the court must rest, costs and. counsel fee will not be allowed her on final hearing.
    On bill for alimony.

      Mr. Samuel G. Naar, for the complainant.

      Mr. Austin E. Swaclchamer, for the defendant.
   Bergen, Y. C.

The complainant’s bill having been dismissed, after answer,, hearing and argument, upon the ground that she failed to make a case which justified her in leaving her husband’s house and entitling her to support and maintenance in a home she had set up apart from that which her husband had provided, she now applies to have the costs which she incurred, as well as a counsel fee, decreed to be paid by her husband, as a part of the final' decree dismissing her bill of complaint. In support of this application reputable authorities were cited sustaining the doctrine that even where the misconduct of the wife warrants a decree of divorce against her, still circumstances may exist which would justify the awarding of costs against the husband. Assuming, without conceding, the correctness of this proposition, it would not avail this complainant, for, with the merits of' the case against her, there was not disclosed a single circumstance which justified her in leaving her home or warranted her suit for alimony.

Costs and counsel fees in divorce cases are not allowed as a matter of right, and awarding them is usually within the discretion of the court, and I am unable to discover any just cause for the favorable exercise of that discretion in this complainant’s behalf.

In addition to the general rule on this subject, we are governed iii this state by “An act providing for divorces and for decrees of nullity of marriage, and for alimony and the maintenance of children.” P. L. 1902 p. 502. Sections 20 and 21 of that act relate to the awarding of suitable support and maintenance to be provided by the husband for his wife, and it is under section 20 that this cause was instituted. It provides that in case a husband shall, without justifiable cause, abandon or separate himself from his wife, and refuse or neglect to maintain and provide for her, this court may decree a suitable maintenance to be paid by the husband for the wife, and empowers the court to enforce such a decree. This section of the act confers upon this court the only jurisdiction it has over cases of this character. Margarum v. Margarum, 57 N. J. Eq. (12 Dick.) 249. Section 21 makes it lawful for the chancellor, upon a proper application, to order a bond to be given, with sureties, conditioned to pay such costs as shall or may be awarded by the court to be paid to the defendant. While'it has been doubted whether this section is imperative (Ballentine v. Ballentine, 5 N. J. Eq. (1 Holst. Ch.) 519), and so far as I am able to ascertain has seldom, if ever, been applied, I can see no reason why it may not in many cases be justly invoked, and it certainly discloses a legislative intent to provide the court with power to decree, in a proper case, the payment of costs by the wife to her husband, and to secure the payment thereof by exacting a bond.

My conclusion is that where a wife files a bill for alimony against her husband without being able to prove the facts upon' which the jurisdiction of the court must rest, it is a wise exercise of the discretion with which the court is vested in matters of this kind to decline to punish the husband who is innocent of ali wrong by laying upon him the burden of his wife’s unsuccessful contest. Frivolous suits of this character ought not to be encouraged, as they would be if a dissatisfied wife, without just cause, can come into this court with an unfounded complaint against her husband and compel him, not only to employ counsel and pay the costs of his defence, hut also he subjected to the expenses she may incur in exhibiting her malicious disposition. • This application must be denied.


text:
    The Vulcan Detinning Company v. American Can Company et al.
    [Decided January 13th, 1906.]
    1. Where a company is using a trade secret, the employment of a' person having knowledge that the company is trying to keep secret its methods, is sufficient to raise an implied contract between them that the employe will not divulge it.
    2. A corporation is charged with knowledge of its agent, employed to purchase a secret process for detinning, that the company from which the purchase is made obtained the secret by fraudulent methods from the true owner, and is not entitled to restrain its use by another company which obtained the secret from it by fraudulent means.
    3. Where some of the officers of a company resign and fraudulently use for their own benefit a secret process for detinning in use by the company, which it had purchased from one known to have procured it fraudulently from the original owner, the persons who resigned from the company having- subsequently obtained a license from the original owner to use the process, do not hold such license in trust for their former associates, for the unconscientious conduct of the latter gives them no standing in equity.

      Messrs. McCarter, Williamson ■& McCarter and Mr. Henry Woilman, for the complainant.

      Messrs. Lindabury, Depnie •& Faulks, for the defendants.
   Bergen, Y. C.

The evidence in this cause shows that the firm of “Th. Goldschmidt,” of Essen, Germany, had, prior to 1894, as the result of experiments pursued for that purpose, so perfected a process by which well-known chemical and mechanical principles could be so applied in the separation and recovery of different metals as to render the detinning of tin scrap profitable to a degree not theretofore attained.

The successful combination was not patented, but its inventors sought to protect themselves against infringement by keeping their discovery a secret, only imparting it to such of their employes as the carrying on of the business required, and then only upon a promise not to divulge.

Dr. Hans Goldschmidt, the member of the firm most active in making the experiments and obtaining the results, testified in detail regarding the agents used, viz., electricity, steam, lime and caustic soda, and the required relative' power and quantity of each, and also described with great particularity the size, character and relative positions of the machinery and other necessary mechanical instruments used in their detinning plant.

In order to understand precisely what these inventors claimed was the secret process which they had discovered, we cannot do better than reproduce a portion of the cross-examination on this point, which is as follows:

“Q. You say that jtou invented this process that you have described?
“A. Yes, sir, I did.
“Q. Wasn’t electrolysis well known before the time you claim you invented this process?
“A. If you mean by electrolysis electrolytical processes,. I answer that there were known a good many electrolytical processes for recovering metals of different kinds.
‘‘Q. You mean by that the separation of metals by electric current?
“A. The principles were known and some of them applied in practice.
“A. And this was true of tin, was it not?
“A. No.
“Q. So that your answer is that tin had never been removed from iron by electricity?
“A. That is not my answer; it has been removed before, but on a .smaller scale.
“Q. Regeneration of lye was known before the time last spoken of, was it not?
“A. What kind of regeneration of lye do you mean?
“Q. Application of carbonic acid and caustification by lime?
“A. The principle was known.
“Q. What, then, was novel in your process of invention?
“A. There were a good many things new, which I partly described this morning; the main tilings are the size of the baskets, the size of tho tubs, and the distances, especially worked out. of the baskets from the walls of the tubs; then the especial kind of inflow pipes, as described, .and the overflow; the electric combination of the tubs, as described;
. last, not least, the whole arrangement of the plant, which was set up in a manner that the handling of the bulky material was saved as much .as possible ; also, the making of the bundles by the steam hammer was new; all those details, of course, were never published, but were kept ■secret.”

It also appears, by a great preponderance of evidence, that while, prior to the discovery by Goldschmidt, a number of per- . sons were engaged in detinning scrap, and in so doing used the ■same agents employed by Dr. Goldschmidt, the business was not especially profitable; but when the processes which Dr. Goldschmidt claims to have discovered were applied to the detinning ■of scrap a very profitable result followed, leading to the building up of a successful business under their management at Essen. The growth of the business at Essen required the purchase of large quantities of tin scrap, some of which was bought in England and some in New York, the purchases in the latter city being made largely, if not entirety, from A. Kern & Company, a firm engaged in importing and exporting goods. The scrap from England appears to have been shipped, prior to 1895, through the Zealand Steamship Company, in the employment of which company were M. Lacmoes, R. J. Brakema and H. L. Herman, who through their connection with the Zealand company, it is fair to presume, acquired some knowledge of the character and extent of the Essen business, for about this time they built a detinning plant at Vlissingen, Holland, under the name of the “Electro-Tinfabriek,” and through newspaper advertisements, followed by personal interviews, induced two of the confidential employes of the Essen factor}7, namely, William Zeyen, who had been employed by Goldschmidt from August, 1891, as foreman of the electrolysis room, and had become familiar with the Essen process of detinning, and William Eoerster, who had been -employed in the same factory from 1892, and worked in the cooking-room, the place where the brine was prepared and regenerated, to leave their employment in Essen and enter the service of the Holland company. Both of these employes had agreed with the Goldschmidt firm that they would refrain from communicating the processes in use which were claimed to be secrets. I have no hesitation in finding that the processes used by Laernoes and his confederates in the Holland factory were, for all practical purposes, the same as those used by the Goldschmidts in their Essen factory, and that it was the intention, deliberately formed, and boldly carried out by Laernoes and his partners, to obtain, by stealth and fraud, the secret processes and methods in use in the Goldschmidt factory, and that this theft was accomplished by debauching and corrupting the trusted servants of the Goldschmidts. It can serve no useful purpose to here recite the evidence which justifies this conclusion. It is sufficient to say that there is no denial of the facts offered in display of the iniquity of Laernoes and his partners. Considerable evidence has been taken in this cause in Germany under a commission issued for that purpose, but Mr. Laernoes was not called as a witness to explain the many damaging circumstances proven. Mr. William Zeyen is in Hew Jersey, in the employ of the complainants in this cause, and the neglect to produce him, unexplained, justifies the conclusion that he could not deny his wrong-doing. Mr. Eoerster was called and exposed the disreputable methods employed by Laernoes to obtain the secret.

The possibility of erecting a detinning plant in this country attracted the attention of Mr. Adolph Kern, the senior member of the firm of A. Kern & Company, as early as 1892, at which time he opened negotiations with the Messrs. Goldschmidt looking to the establishment of such a plant in America, to be operated according to the processes in use in Essen. The negotiations, carried on principally by correspondence until 1897, produced no satisfactory result, and in December of that year a party of gentlemen, seven in number, of whom the defendant Assmann was one, met with Mr. Kern at an office in New York City to consider the desirability of making further efforts towards the founding of a detinning factory in the United States. At that time subscriptions to the amount of $42,000 towards the organization of a company for that purpose had been secured, and the gentlemen taking part in the conference determined that sufficient progress had been made to warrant the sending of Mr. Kern to Europe for the purpose of obtaining one of the secret processes in use there. In furtherance of this conclusion, Mr. Kern first visited the Holland factory, and then went to Essen, where he saw the'Messrs. Goldschmidt, and tried to induce them to join the enterprise, but they refused, giving as a reason that, in their opinion, the cost of wages and materials in the United States would prevent the successful application of the process in that country. From Essen Mr. Kern returned to Holland and entered into negotiations with Laernoes, who acted for the Electro-Tinfabriek, of Ylissingen, which resulted in an optional contract, by the terms of which, in consideration of one-third of the capital stock of a company to be organized for the carrying on of the detinning business in the United States, the Holland company were to furnish the processes according to which they were detinning scrap, together with all necessary plans and instructions to properly install a plant, and also to send over to this country two men qualified to give instructions and to superintend the erection of the factory. On his return to this country Mr. Kern submitted to his associates the result of the negotiations he had made in their behalf, and he was directed to accept the option and to procure a formal contract based on its terms. This was done, and Laernoes with Zeyen came to this country to. supervise the erection of the factory and instruct the purchasers how to operate it. On the arrival of Laernoes the formal contract was prepared and executed between the Electro-Tinfabriek and A. Kern & Company, Laernoes acting and signing as the representative of the Holland firm. Thereupon a company was formed under the name of the “Vulcan Metal Refining Company,” to which company A. Kern & Company assigned the contract which they had made on behalf of their associates with the Holland company. The method of construction and operation as carried on in Holland was thereupon committed to writing by Laernoes and delivered to the company, and upon the suggestion of Mr. Assmann, four copies were made of the original formula, one being handed to each of four trustees appointed by the board of directors, to hold in trust for the company, the reason given by Mr. Assmann being, as stated by Mr. Kern, “that as we have a valuable secret process, it ought to be preserved so as to guard against the loss of it by the death of any one of the parties conversant with it.” The original and all of the copies, except the one held by Mr. Assmann, as trustee, have been destroyed. The reason for the destruction was not made to appear, and when Mr. Assmann dissolved his connection with the company, the copy which he had was delivered to Mr. Kern. A factory was erected during the year 1898 at Sewaren, New Jersey, and in 1899 another company was organized by the same parties, under the title of the ‘Vulcan Western Company,” and this company, supplied with the same formula, erected a similar plant at Streator, Illinois. Subsequent to this the two companies were merged into the complainant company. In 1901 Mr. Assmann, having then become a director and officer of the American Can Company, resigned his position with the Vulcan company, and sold his stock to Mr. Kern, giving as a reason for dissolving his connection with the Vulcan company that as the American Can Company was a large seller of tin scrap to the Vulcan company, of the selling of which he had charge, he could not consistently continue to occupy the position of buyer and seller. Shortly after Mr. Assmann dissolved his relations with the Vulcan, company, the American Can Company began the erection of two detinning plants, one at Paulsboro, New Jersey, and the other at Joliet, Illinois, and employed ihe defendants Schmaal, Baumann and Egbert, Schmaal having until very recently been, and Baumann and Egbert then being, employed by the complainant company in positions of trust, such as necessarily required the imparting to them of the alleged secret processes used by the complainant company. Considerable testimony was directed to supporting and denying the allegation that these defendants were employed under an express contract not to reveal the secret processes in use. I am, however, satisfied, even in the absence of an express agreement, that the confidential relation existing between these defendants and the complainant company^ and the effort made by it, to the knowledge of these defendants, to keep secret the methods employed, is sufficient to raise an implied agreement on their part not to divulge any such secret.

No reasonable doubt can exist under the evidence in this cause that the methods and processes in use by the defendants, the complainant Laernoes and his partners, under the name of the Electro-Tinfabriek, and by the Messrs. Goldschmidt at Essen, are, for all practical purposes, identical, the changes in mechanical construction being so small and unimportant as to hardly merit consideration. The bill of complaint prays that the American Can Company, and the defendants Assmann, Baumann, Schmaal and Egbert, may be enjoined from operating the detinning plants at Paulsboro and Joliet, or constructing or operating any other factories in imitation of those of the complainants, or for the purpose of utilizing or operating under said secret process, or any improvements thereon, and that the three defendants last named be enjoined from performing any further services in the detinning plants of the can company, and that the employes of Assmann and the can company be enjoined from using or communicating any knowledge they may have of the secret process, or of the construction or operation of complainant’s plant, and that they be required to surrender and destroy all copies of such secret process and of all drawings and designs that might aid any other in the construction of similar plants.

The defendants, among other things, seek to justify their action upon the ground that the process was not a secret one. It certainly appears that a number of persons, particularly in Germany, were engaged in detinning by a process in some particulars not unlike that in use at Essen by the Messrs. Goldschmidt, yet it is equally clear that until the Goldschmidts had perf ected their plant the detinning business cannot be. said to have been successful, and I am inclined to the belief that the Goldschmidts did discover a method or process for detinning scrap, which was not known to their competitors, and that so far as they are concerned their secret could not be said to have been divulged by them, and .if it escaped it was through the gross betrayal of a confidence reposed in a trusted employe. While it thus appears that when Mr. Kern was dealing, on behalf of his associates, with Laernoes and his partners for a sale of the information which'they possessed, and which they had surreptitiously obtained from the Essen factory, the methods and processes then employed were not so well known as to have become the property of the world, it is manifest from this evidence that from the year 1900 down to and including the year 1903, numerous publications appeared in scientific journals describing with some particularity these or similar processes. A notable article on this subject, by Dr. Hans Mennicke, was published in May and June in the “Zeitschrift fur Electrochemie.” A reading of this article, in comparison with the formula furnished by Laernoes, justifies the testimony of Mr. Leitch that it describes the process employed at Paulsboro and Joliet. So if this case was devoid of what the complainant insists is a trust relation between the parties, I should have no hesitation in declaring that the process is no longer such a secret as to justify the interference of this court in preserving it to the complainant. What the complainant insists upon is that Mr. Assmann, as one of the original associates, occupies a relation of trust and confidence towards those who, in conjunction with him, purchased this .secret, and who, relying upon his agreement to preserve the secret, became stockholders of the complainant company, and invested their money, and lie ought now to be estopped from declaring that the process is no longer a secret, without regard to whether or not Laernoes and his partners had a title which they could properly convey. This contention, they claim, is supported by the following expression to be found in the opinion of Vice-Chancellor Reed overruling a demurrer interposed to the bill of complaint in this cause: “Now, the title to this trade secret, held by the Vulcan company, was, I think, good against every one but Dr. Goldschmidt 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 company had no right to such trade secret, because it had been obtained honestly from owners who had dishonestly obtained the knowledge from the discoverer.” Vulcan Detinning Co. v. American Can Co., 67 N. J. Eq. 243.

While the proposition thus stated by Vice-Chancellor Reed appeals with great force to a court of equity, and is one which I would be bound to follow if the conditions which he states were present, viz., that “it had been obtained honestly,” it has no application here, because, in my judgment, the secret was not honestly obtained by Mr. Kern for his associates, because he had sufficient knowledge of the dishonest manner in which the Holland people obtained the secret from the rightful owner to charge him with notice of all such facts as a proper inquiry would have disclosed, and that knowledge will be imputed to his associates and the officers of the company for whom he was acting, in the business to which it related.

A corporation is liable for the fraud of its agents acting within their authority and in due course of its business, and cannot shield itself from responsibility by showing that the agent also failed in his duty to the corporation. First National Bank of Hightstown v. Christopher, 40 N. J. Law (11 Vr.) 435, 439. “The fact that the information had not been acquired by him in the course of his agency does not militate against the application of the rule in question, when the agent personally participates in the later transaction in behalf of the corporation. Where information is casually obtained by an agent for a corporation the corporation is not charged with notice from the mere fact of its agent’s knowledge; hut if the corporation act through such agent in a matter where the information possessed by'him is pertinent, the knowledge of the agent will be imputed to the priucipal. To bring about this result two things must concur, viz., the possession by the agent of pertinent information and his personal participation in respect thereto on behalf of his corporation.” Willard v. Denise, 50 N. J. Eq. (5 Dick.) 482.

Mr. Kern admitted that before he had any dealings with .Laernoes, and on the 16th day of May, 1896, he learned from Dr. Goldschmidt, by correspondence, that Laernoes, representing the Holland conctern, had obtained his secret processes through Mr. Zeyen, one of his servants, and that Zeyen had been arrested and punished in a German court for taking from the Essen faetorjr, for the purpose of conveying it to Laernoes, a sample part of a metal basket used in the Essen factory, and that one of these letters from Goldschmidt, if not two, contained copies, taken from German newspapers, of articles describing the alleged offence. A part of the article which Mr. Kem had reads as follows:

“During the duration of the shipping contract by which the Zealand company acted as agents for Th. Goldschmidt, the officers' of this company advertised anonymously in the Essen papers for workmen on goods such as the Goldschmidt concern was making. After several workmen had applied, and had been engaged, although they remained for the timo being in the employ of the Essen firm, Inspector Laernoes obtained from them an exact description of the process and drawings of the apparatus. Workman Zeyen, who is now accused, refused to furnish samples, as only a short time before another workman had been punished for a similar theft. After the necessary apparatus had been constructed in accordance with drawings obtained from the man Zeyen, employed by Laernoes, Zeyen took leave of absence, under false pretences, went to Vlissingen, and made the first experiments on a steamer belonging to the Zealand company. The workman thereupon returned to Essen, and remained after his engagement, by order of the company, as it were, as a spy, with the firm in Essen. Later the Essen firm got wind of the competition, but without knowing that the Zealand company was back of it. The firm of Goldschmidt therefore turned to the Zealand company, whom they considered as their friends, and asked for information regarding the new firm, whereupon they were told that the Zealand company knew nothing of such a firm in that place. At the same time, the workmen engaged by Laernoes and his associates were speedily called away from Essen to Vlissingen. Later it was learned that the workmen had not only furnished information and plans, but also samples, which were of the greatest importance in the carrying on of the work.”

When Mr. Kern went to Holland for the purpose of obtaining the secret process he had with him the letters and newspaper extracts which he had received from Dr. Goldschmidt, and the only steps which he took to verify or disprove these charges was to communicate them to Laernoes, who very naturally denied them. The following extracts from the cross-examination of Mr. Kern on this point axe very suggestive:

“Q. Did you make any inquiry as to whether or not the plant at Flushing differed in the smallest detail from the Essen plant?
“A. I did not.
“Q. Did you inquire as to whether or not the process used at Flushing differed in the smallest detail from the process used in the Essen plant?
“A. Mr. Laernoes told me that it was a different process.
“Q. Did you ask him how it differed?
“A. We did not go into details, because he refused to speak of it; he refused to go into details in regard to it.
“Q. Did you ask him how it was that he had enticed this man away from Dr. Goldschmidt—why he did that?
“A. I did not.
“Q. Did you ask him how it was that he had the man that he had employed from Essen bring samples from .the jv°rks there?
•‘A. I did not.
“Q. Did you ask him whether they did or not?
“A. I did not; but he told me that they did not.
“Q. Did he tell you they did not?
“A. Ves, he told me that of his own accord; he gave me that information himself.
“Q. Did he explain, then, how it was that both of them were convicted of doing it—what did he say to you about that?
“A. He said that he was not convicted.
“Q. He said that personally to you; now, the paper told you that both of the men he employed were convicted and sent to prison?
“A. He explained it on the score of prejudice on the part of the court of Essen.
“Q. Did he deny that the men had bronght samples from the Essen plant to him?
“A. He did.
“Q. Did you ask him about his keeping the man at the Essen plant as a spy, after he had employed them to put up the Flushing plant?
“A. I did not.
“Q. Did he say anything to you about that?
“A. He did not.
“Q. You knew that the paper—the steel and iron paper—had charged that?
“A. Yes, sir.
“Q. Did you ask him about his having advertised in Germany for men understanding this process?
“A. I did not.
“Q. Did you ask him whether or not, in fact, he obtained from these . two men that he had employed from Essen a thorough and detailed description of thp process and a drawing of the apparatus?
“A. I did not.
“Q. Did he make any statement on that subject to you?
“A. I do not think he did; he simply denied having stolen anything, and stated that the man whom he engaged knew very little about the process.
>‘Q. Did he state whether or not he availed himself of what that man did know about the process?
“A. He did not.”

A careful reading of Mr. Kern’s testimony discloses that he not only made no effort to obtain the whole truth from Laernoes, but admits that he made no attempt to find out from Dr. Goldschmidt, whom he afterwards saw, whether there was any truth in what Laernoes did deny, or whether the story published was true or false. It is perfectly clear to me that, being unable to negotiate with Dr. Goldschmidt, he decided to obtain the information he was so anxious to get from Mr. Laernoes, although, if not already convinced that he was purchasing from Laernoes stolen property, he very carefully abstained from so using the information which he had as to ascertain the truth.

When stripped of all refinements, the situation presented is this: Dr. Goldschmidt discovers a secret process for detinning; Laernoes entices Zeyen, a trusted employe, to betray his master, whereby he became possessed of a secret process belonging to another; that secret the complainant purchases, under condi- ' tions which charge it with knowledge of the wrong committed against Dr. Goldschmidt, thereby helping Laernoes and Zeyen to market their stolen property. It is not to he conceived that a court of equity will stain its hands by contact with such a disreputable proceeding.

It was most strenuously insisted on the argument by the complainant that its association with Laernoes in procuring this secret was a matter entirely distinct from the present controversy, and that the rule requiring a complainant to come into a court of equity with clean hands does not require that all his acts be pure, and that the uncleanliness for which the rule may be invoked must have some relation to the other party. My conclusion is that the rule applies in this case. The foundation of the complainant’s right rests upon the assignment to it by Laernoes of the right to use this secret, and if in ascertaining its title, for without title it would have no property to protect, it is made to appear that the title was acquired knowingly from one who could never equitably invoke the court’s protection, good conscience requires that the court should abstain from interfering. It is not alone fraud or illegality which will prevent a suitor from entering a court of equity. Any really unconscientious conduct connected with the controversy to which he is a party will repel him from the forum whose very foundation is good conscience. Pom. Eq. Jur. § 404.

In Edward Thompson Co. v. American Law Book Co., 122 Fed. Rep. 922, relief by way of injunction was refused upon the ground that the acts of the defendant of which the complainant complained were of the same character as those in which the complainant was itself indulging, and that if the defendant was guilty of literary piracy, the complainant was guilty of the same offence, and that a literary pirate was not entitled to consideration in a court of equity, Judge Coxe saying, “consistency requires that the defendant should not be punished for doing that which the complainant does with perfect impunity.”

In Krauss v. Peebles’ Sons Co., 58 Fed. Rep. 585, Judge Taft stated the rule as follows: “The reason why relief is refused complainant in such cases has nothing to do with the defendant’s rights or wrongs. It is that the court will not protect a fraudulent business of a plaintiff, however much in the wrong the defendant may be.”

In eases of this class the jurisdiction of the court is rested upon its duty to protect property from wanton destruction, and it interferes by injunction because that is the only efficient method by which property of this character can be preserved to the owner. This complainant claims to be the true owner of a secret process, a recognized species of property, but when the owner asks the aid of the court to restrain the defendant from injuring his property, it is essential that he should not be guilty of any wrong-doing in connection with the property he seeks to protect. He cannot represent to the court that he came honestly by the property when the contrary is the truth, and then successfully invoke the help of a court of equity, for he is guilty of a false representation regarding the very right which he desires protected. The complainant in this cause pirated a secret process belonging to the Goldschmidts. The defendants are, if we accept the complainant’s contention, guilty of the same offence, one step removed, and as each is using the same secret process, the property of another, from whom, to the knowledge of each, it was dishonestly obtained, .they are both in pari delicto. Leather Cloth Co. v. American Leather Cloth Co., 4 De G. J. & S. 137 ; Manhattan Medicine Co. v. Wood, 108 U. S. 218.

The proposition advanced by the complainant, viz., that the defendants having agreed with the complainant, either as joint purchasers or employes, to keep secret this process, they cannot now be heard to question the title of the complainant because of a trust relation, either express or constructive, thereby raised, would appeal with great force to a court of equity if in the purchase of the secret process the complainant had acted honestly and was justified in the belief that the vendor’s title was without fault. But the mainstay of this proposition is absent in the case at bar. ' The purchasers knew, or were bound to know, that in treating with Laernoes and his partners they were obtaining for use the property of another, dishonestly procured, and for which they had unsuccessfully negotiated with the true owner. That they afterward disagreed as to which of them should appropriate what they had thus improperly secured does not make it the duty of a court of equity to interfere and by injunction protect some of the wrong-doers against the assaults of their confederates. The want of honor among thieves is not a ground of equitable jurisdiction.

Since the bill of complaint was filed in this cause, the defendants have obtained from the Goldschmidts a license, exeeuted in due form, permitting them to use their secret in the United States forever, and in Canada for ten years following the date of such license, which was October 17th, 1904. This assignment conveys to the American Can Company a title to this secret process from its discoverer, and is superior to any rights which the complainant has. The claim made by the complainant that this assignment of, or license to use, the secret process, although made'to the American Can Company, must-be taken to have been niáde to that corporation in trust for the complainant, does not, under the facts disclosed in this case, meet my approval, nor has it the sanction of judicial authority. The trust, if any, which existed between these parties was based upon their agreement to keep secret a process purchased in bad faith from Laernoes, and it neefls no argument to sustain the proposition that the parties to such a trust have no standing in equity.

After a careful examination of the whole case, I am satisfied that the complainant has failed to present a cause calling for equitable aid, and a decree will be advised dismissing the bill of complaint, with costs. >


author: Bergen, V. 0.

text:
    Joseph S. Plum, executor, v. Johh B. Smith et al.
    [Decided January 19th, 1906.]
    1. A legacy given in lieu of dower will not abate if at the time of the making of the will the wife had an inchoate right to any dower out of the testator’s estate.
    2. A will giving testator’s wife the interest on a sum of money, so long as she lives and remains unmarried, “to be left secured on my real estate,” does not require the legacy to be secured by a mortgage on testator’s real property, but creates-a charge thereon without the aid of a mortgage.

      On bill, &c.

      Mr. Oliver I. Blackwell, for the complainant.

      Mr. John B. Hoffman, for the defendants.
   Bergen, V. 0.

Joseph Plum died, leaving a last will and testament in which the only provision he made for his widow is expressed in the second and third items thereof as follows:

“Second. I give and bequeath to my beloved wife, Hannah, the interest on $2,000 as long as she lives and remains unmarried and my widow, to be left secured on my real estate, but on her decease or marriage to be equally divided among my children.
“Third. I also give, devise and bequeath to -my beloved wife, Hannah, all my household furniture except wardrobe,” &c.

The executors named, and who qualified, were the widow and Joseph S. Plum, a son, who invested the sum of $2,000 in a mortgage on lands of which the testator died seized, and the interest on this mortgage was paid to the widow until April 1st, 1893, between which date and the date of her death, July 20th, 1895, the interest remains unpaid. The mortgage has been foreclosed, the property sold, and the amount realized not sufficient to pay the principal and interest in full, and the question presented is whether the administrator of the widow is entitled to priority in payment to the extent of the unpaid interest. The claim of the administrator is that the widow, having accepted the bequest in her favor in lieu of her dower in land, is entitled to be paid the compensation which it was agreed she should have when she accepted the provision made for. her in the will, rather than that conferred upon her by the law. While this will does not, in terms, declare that the legacy was intended to be in lieu of dower, it is quite manifest that the provision made by this testator had that object in view, and that the widow did elect to accept the testamentary gift in satisfaction of her claim fox-dower. It is a general rule that a legacy given in lieu of dower shall not abate if at the time of the making of the will the wife had an inchoate right to any dower out of the testator’s estate, for in that case the widow, if she does not dissent to the bequest, is accepting a compensation for the dower which ought to be paid at the price fixed. It is not a voluntary bounty or favor, but a meritorious consideration. Perrina v. Perrine, 6 N. J. Law (1 Halst.) 133, 138.

The testator here gives to his wife the interest on $2,000 as long as she lives and remains unmarried, “to be left secured on my real estate,” and on the argument it was insisted that these words should be interpreted to mean “secured by a mortgage,” but it can hardly be doubted that this language will charge the payment of this interest on testator’s land without the help of a mortgage. The land upon which this mortgage was an encumbrance was all the real property of which the testator died seized, and consequently constituted all of the real estate charged with the payment of the widow’s legacy. If at any time during her life it became necessary to enforce the payment of her legacy, she could have, by proper proceedings, obtained a decree for the sale of so much of the land as might be necessary to raise and pay the share of her legacy which had matured, and such payment would have been at the expense of the corpus of the fund, and if necessity required, might, by repeated sales, have ultimately exhausted the principal. ' That the land which was charged with the payment of this legacy has been sold by other proceedings, and thereby reduced to money, does not, in my judgment, relieve the fund from the obligation which the testator imposed upon the land.

My conclusion is that the widow was entitled to be paid the interest on $2,000 as long as she lived, unmarried; that this bequest in lieu of dower is charged upon the lands of the testator, and that the widow cannot be called upon to abate her legacy so long as any portion of the real estate of the testator, or the proceeds thereof out of which payment can be made, remains. It is the surrender of existing, rights which gives the preference to a legatee of this character, and as was declared by Lord Hardwieke (1 Pop. Leg. 297), “the wife’s abandonment of her legal rights would entitle her to payment of the whole of the benefits which were given to her under the will, in preference to the other general legatees."

The contest here is between the general legatees of the testator and the representative of a widow who surrendered her dower right for a consideration, which the law says she is entitled to have paid without abatement. While this cause originated in foreclosure proceedings, it has been before the chancellor on a motion to strike out part of the pleadings, and in passing upon that question the parties were allowed to amend the pleadings so as to present the issue now considered.

The result which I have reached is that the administrator of the widow is entitled to be paid, in preference to the other legatees, the residue of the compensation promised the widow as a consideration for her dower.


author: Btcbgeií, Y. C.

text:
    Caroline W. Hiles v. Caroline C. Garrison et al.
    [Decided January 24th, 1906.]
    1. A testator provided that his property should be “put in a trust,” and that the income should be equally divided between his brother, sister and widow as long as the widow remained unmarried, and in-case of her death or marriage her share should go to the brother and sister without making any disposition of the corpus or conferring power of sale.-—Held, to create a trust to continue during the widowhood or life of the widow, and on her death or remarriage the corpus of the estate passed to testator’s next of kin as intestate property.
    2. On the failure of a testator to name a trustee the court will appoint one to carry out the trusts created by the will. •
    On bill for construction of will and appointment of trustee.

      Mr. William T. Hilliard, for the complainant.

      Mr. Thomas G. 'i-IHUard, for the defendants.
   Btcbgeií, Y. C.

The bill in this case is filed by the complainant, widow of Richard Hiles, deceased, for the construction of his last will and testament, and the appointment of a trustee to execute such trusts as may be determined are established by such will. As the relief sought is the appointment of a trustee, and the necessity for such appointment requires the construction of the will as an incident to the relief sought for, the complainant is property here.

The pertinent part of the will is the second clause, which reads as follows:

“I do devise that all my property and bonds and morgages be put in a trust, and the income be devided equally between my brother, Biddle Hiles, and sister, Caroline Garrison, and my wife, as long as she remains my widow, in case of her marring or deth her share to gowe to my brother Biddle Hiles, and my sister Caroline Garrison.”

The testator died possessed of considerable estate, the personal having been appraised at the sum of $54,039.88. His real property consisted of an undivided interest in certain real estate in the county of Salem, in this state, such interest being estimated by the parties in interest at something over $20,000. At the time of his death the only next of kin of the testator was his brother, Biddle, and his sister, Caroline. The will was prepared by the testator, and does not clearly express his desires, and the purpose of this cause is to ascertain whether a trust has been established by the terms of such will, and if so, that a trustee be appointed to carry out such trust.

While this will is very inartistically drawn, I think the clear intention of the testator was to create a trust, by the terms of which the income of his estate was to be divided equally between his widow, brother and sister, and that this trust shall continue as long as his widow, lives or remains unmarried, and on the happening of either of such events the trust terminates.

As the testator has Made no disposition of the corpus of the fund after the expiration of the trust estate, he died intestate as to the residue of his property, and it will go to his next of kin. That the testator named no trustee will not prevent the execution of the trust, for the court will always appoint a trustee wherever necessary to sustain the trust, and a trustee will be appointed. The will contains no power of sale, and therefore the trustee cannot dispose of the land by virtue of any authority ■contained in the will. It is, in my judgment, however, included in the trust, and subject to that will vest in the heirs-at-law of the testator.

I will advise a decree in accordance with the above.