real estate was passed on January 16, 1901, by the persons who had been selected by the promoters as trustees. It recited that William F. Smith had proposed to sell to the association 129 acres of land situated in Linden, Union county, for the purposes of said association, on condition that the association issue to the said William F. Smith, in exchange for his deed conveying his equity in said land and property to the association, 9,000 shares in the purchase-money fund of said association, to be realized by contribution thereto, under the laws of the state of New Jersey, of one-half the proceeds arising from the sale by the association of plots in said premises. The resolution following this preamble reads as fol lows: "Resolved, that the association purchase the property offered by the said William F. Smith and issue to him therefor as full consideration for his equity therein 9,000 shares in the purchase-money fund of this association to be made up of one-half of the proceeds from the sale or use of plots as authorized by the laws of the state of New Jersey, this association assuming any mortgage or other incumbrances on said property existing over and above the equity of said William F. Smith therein, which mortgage shall not exceed the sum of $ to be dealt with by the association in the future as this association may be advised. "And be it further resolved, that the president and treasurer of this association be and they hereby are authorized and directed to execute a contract on the part of this association with said William F. Smith agreeing to accept from him a deed of the said property and to deliver to him in exchange for said deed 9,000 shares in the purchase-money fund of this as sociation made up as specified in the next preceding resolution, and to execute any other contract with reference to the said deed that they may deem necessary." | first parties of this indenture, said shares giving the holders thereof their pro rata lien and claim upon the land purchase fund of said association, composed, under the laws of New Jersey, of at least one-half of the proceeds of the sale of all burial plots in the grounds of said association conveyed to it by these presents for conversion into burial plots. (2) To pay semiannually in cash to said William F. Smith, his heirs, administrators, executors, and assigns, one-tenth part of the gross plot or of any use thereof or interest therein, proceeds of the sale, lease or loan of each burial made by said Linden Cemetery Association, party of the second part, from the land hereinafter conveyed to said association by this indenture. (3) To sell, lease, or loan or in any other way to divest itself of any part of its title to or possession of no portion of the lands hereinafter conveyed to it, in any other form or for any other use than as burial plots, except for the purpose of straightening its lines or conforming to some regulation imposed upon it by law, without the consent in writing of the said William F. Smith, his heirs, executors, administrators, or assigns; and in every case to pay one-tenth of the gross proceeds thereof to the said William F. Smith, his heirs, assigns, executors, or administrators. "(4) To set apart at least fifteen acres, under the direction and in conformity with the wishes of said William F. Smith and any three of the trustees of said association whom said Smith shall appoint to act with him in the premises, such fifteen acres not necessarily being in one solid tract, but possibly made up from various parts of the lands hereinafter conveyed, from which fifteen acres no burial plot shall be sold at less than two and one-half dollars per square foot, the proceeds from the sale of burial plots in which as they are made, after deducting the one-half thereof required by law, to be distributed among the shareholders, and the one-tenth thereof to be paid to said Smith, his heirs or assigns, as hereinbefore provided, shall be lodged with some trust company to be selected by said Smith and the three trustees aforesaid, and shall remain on investment with It will be observed that the only consid-proved by said Smith and his said advisers, unsaid trust company, under a trust deed aperation agreed by this resolution to be paid til the said proceeds and the accumulations by the association to William F. Smith is thereof shall have made a fund sufficient to 9,000 shares in the purchase-money funds. provide an income adequate to the perpetual maintenance of the lands hereinafter conveyed At that time the situation of the property in as a high-class cemetery, and such income shall question as to incumbrances was this: Smith be applied to such maintenance when the expaid for the property $37,500, subject to haustion of burial plots shall cause to cease the mortgages aggregating $32,000, leaving as his fund for embellishing and maintaining such cemetery theretofore derived from forty per equity only $5,500. cent. of the proceeds of burial plots not within said fifteen acres, the purpose of this provision being to insure the perpetual care of the said cemetery and its maintenance as a park when its capacity as a burial place shall have become exhausted. If there should remain any portion of said fifteen acres unsold as burial plots at the time when such trust fund has become sufficiently large to afford an income adequate to such cemetery maintenance, then the party of the second part covenants and agrees, after paying to the shareholders one-half of the proceeds of future sales of burial plots from said fifteen acres, to pay over the balance thereof to the said William F. Smith, his heirs, executors, administrators and assigns. And the party of the second part further covenants and agrees to defray from such trust fund the expenses of the removal and reburial in lots also purchased from such fund of any bodies directed by law to be removed from the said land hereinafter conveyed, if such bodies shall have remained buried in said land for the space of twenty-five years. If the letter of the resolution is to be followed, the cemetery association would receive title to this small equity upon issuing to him 9.000 shares to represent the $5,500. I have been careful to state this part of the transaction in detail, because, as a matter of fact, this plan was not followed in any respect, but was promptly departed from by the terms of the deed which was delivered a couple of weeks later. On January 29, 1901, William F. Smith conveyed to the association three tracts of land aggregating 131,675 acres; the conveyance was stated to be in consideration of five certain covenants therein set forth and entered into by the party of the second part. The covenants are as follows: "(1) To deliver to said William F. Smith nine thousand shares of the Linden Cemetery Association, made out in the name of C. O. "(5) As a fifth and final covenant and consideration for the conveyance to it of said land part agrees to assume all mortgage or other incumbrances on the land hereinafter conveyed to it and to hold the parties of the first part, their heirs, executors, and administrators, forever harmless therefrom." Inasmuch as the matters which are com plained of by the complainant arise principally out of one or another of the foregoing covenants, I shall take them up and dis cuss them seriatim. It may not be amiss to say at this point that the most superficial examination of the deed containing the above-recited covenants as delivered discloses that it has a very slight resemblance to the document which the minute book shows was negotiated for by the association. This fact accentuates the remarks made by the eminent judge above quoted touching the independent directorate, and demonstrates the actual control which the promoters had over the noninterested board. [2] The first covenant relates to the creation and disposition of what is known as the land purchase shares. These are supposed to have been authorized by section 10 of the rural cemetery association act (1 Comp. St. 1910, p. 375, § 10 [Rev. 1877, p. 102] as amended by an act found in P. L. 1882, p. 25). This section provides that one-half, at least, of the proceeds of all sales of lots or plots shall be first appropriated to the payment of the purchase money of the land acquired by the association until the whole purchase money shall be paid; and the residue there of to preserving, improving, and embellishing the said cemetery grounds and the avenues and roads leading thereto, and to defray the incidental expenses of the cemetery establishment; and that, after the payment of the purchase money and the debts contracted therefor and for surveying and laying out the land, the proceeds of all future sales shall be applied to the improvement, embellishment, and preservation of said cemetery, and for incidental expenses, and to no other purpose or object as long as such embellishment is incomplete. The shares were issued in the following form: "This is to certify that is entitled to shares in the Linden Cemetery Association, of New Jersey, transferable only on the books of the association in person or by attorney, on surrender of this certificate. the case of East Ridgelawn Cemetery Co. v. Frank, 77 N. J. Eq. 36, 75 Atl. 1006, and was pronounced by him to be entirely outside of the authority conferred by the statute above referred to. He held that the statute contemplated the purchase of the land for a definite price, and that consequently the shares, if shares could be issued at all by the association, must be predicated upon marks and criticisms made by the Vice Chansome definite and fixed amount. The recellor in that case apply with peculiar force to this case, and I have no hesitation in saying that the scheme here entered into is extrastatutory, and cannot be carried out in accordance with the original intention of the fair market value of the land in question at parties. There must be an inquiry as to the the date of the purchase, and, if the issue of shares is to be approved, they must be based upon actual values at that time, and not upon such values as may subsequently be reached when the cemetery lots shall have become much more valuable by reason of the more extensive use of the burial ground. The scheme of issuing shares was one of the methods by which the promoters obtained an undisclosed profit to themselves, and, in so far as it aided and assisted in this design, it is fraudulent and void. The association cannot be made chargeable with anything which it did not lawfully receive. The land purchase fund was divided into 9,000 shares; that is to say, each shareholder was entitled to receive for each share held by him 1/9000 part of the proceeds of the sale of all the lots which were sold by the association for burial purposes. Five thousand of these shares were turned back by the promoters to the corporation, and were sold by it to raise money with which to pay off the mortgage on the property, and the remainder represented the secret profit made by the promoters out of the enterprise. The association must recognize a liability of some sort for the money actually received by it from the land purchase shares or from any other source, but it cannot be made to respond to claims arising out of the issue of land purchase shares from which it received no benefit. Therefore the claims of so-called shareholders which brought no money to the treasury of the company are void and cannot be enforced. The so-called shares have no This certificate is a lien on the land pur-negotiable quality, and title does not therechase fund of the association, which fund, under the laws of New Jersey, must be composed of at least one half of the proceeds from the sale of burial plots in the said cemetery; and the holder hereof is entitled to have paid over to him one 1/9000 part of said fund for each share which this certificate represents; and he will be so entitled until the last burial plot in said cemetery is sold and its proceeds distributed according to law. "In witness whereof, the said Linden Cemetery Association has caused this certificate to be signed by its president and treasurer," etc. A scheme of issuing share certificates quite similar to the one now before the court was dealt with by Vice Chancellor Stevens in fore pass by delivery or indorsement. The doctrine of protection which is afforded to bona fide purchasers without notice and for value does not apply, and every purchaser and holder of the 4,000 shares must be held to have known that they were issued without the sanction of any law. In so far as these so-called shares can be traced to the promoters, and from them to the present holders, they must be canceled. After the decision in East Ridgelawn Cemetery Co. v. Frank, 77 N. J. Eq. 36, 75 Atl. 1006, it was quite evident that schemes like the present were in great danger. In 1911 | be decided as if no such legislation existed. and 1913 acts were passed by the Legislature whose undoubted purpose was to cure any defects that there might be in this plan of financial organization; and an able argument was addressed to the court in favor of the view that the Legislature had now sanctioned the plan in question, if, indeed, it had ever been open to question. [3] But it is doubtful whether the so-called curative acts of 1911 and 1913 (P. L. 1911, p. 626; P. L. 1913, p. 521) have any effect whatever upon the situation developed in this case. It is quite clear that the act of 1911 does not. It applies to only one class of cases; that is, cases of purchase, in which the purchase price is fixed at the amount of not more than one-half of the proceeds of all sales of lots or plots, etc., thus excluding this case, in which 60 per cent. of the proceeds of lots was pledged for the payment of the purchase money. [5] An attempt was made to ratify the land purchase and the form of the deed by which the land was conveyed to the association at a meeting of the board of trustees held on January 31, 1901. The board which attempted this ratification was as powerless to act in the matter as was the board which passed the original resolution; hence ratification by it wrought no result whatever, and the situation after January 31, 1901, was exactly the same as the situation before that date. Besides, it is impossible to ratify a fraud and make that good which is vicious from the foundation. Neither does it appear that at the time this ratification was sought there was any disclosure made to the board of the contents of the deed in question. On this point see Booth v. Land Filling Co., 68 N. J. Eq. 536, 59 Atl. 767; Siegman v. Electric Vehicle Co., 72 N. J. Eq. 409, 66 Atl. 1134. Still another attempt was made to procure a ratification of the deed and the issue of 9,000 shares in the land purchase fund, and the organization, at a meeting of lot holders held on March 13, 1901, at which it was resolved by them to ratify and confirm the acts of the officers and agents of the association in any way connected with the acquire [4] The act of 1913 is a general act and not a supplement to the rural cemeteries act, the first two sections of which must undoubtedly be construed to be prospective in their operation. Frelinghuysen v. Morristown, 77 N. J. Law, 493, 72 Atl. 2. The fourth section relates only to joint agreements, so that whatever there is in the actment of the said property, and especially to which relates to the case in hand is found in the third section. Concerning that section there are two things to be said: First, its operation is limited by the words "not in contravention of the provisions of this act." Just what that may mean is very difficult of solution. Its sponsors evidently considered it to be difficult because they put in the fifth section a provision that, if any portion of the act should be held to be invalid, it should not affect any other portion. And, second, if the act means what it appears to say, then it is possible for a cemetery company to pledge all its lots and all the proceeds of the sale thereof for the payment of purchase money, and thus abrogate what has been the settled policy of our Legislature since 1877. But, even if the third section should be found to be clearly retrospective, yet it could not affect the vested rights of any interested person, and this act, so construed, would have the effect of depriving the complainants of a remedy which they had at the time of the filing of the bill. Any act which has the effect of impairing the obligation of a contract or of depriving the party of a remedy which existed when the contract was made is obnoxious to the provisions of our Constitution, and therefore void. Baldwin v. Newark, 38 N. J. Law, 158; Maxwell v. Goetschius, 40 N. J. Law, 383, 29 Am. Rep. 242; Moore v. State, 43 N. J. Law, 203, 39 Am. Rep. 558; Presbytery of Jersey City v. First Presbyterian Church, 80 N. J. Law, 577, 78 Atl. 207. I therefore conclude that the so-called curative acts have no application recognize the 9,000 shares delivered as part consideration for said property, and all agreements, covenants, bargains, and promises contained therein and in said deed, as their free act and deed, adopting all of the same as fully by that resolution as if their names had been subscribed thereto and their seals thereto affixed. But it does not appear that the lot holders were informed at that time of the contents of the deed or of the general situation. It was the duty of the promoters to make such disclosures concerning their profits as would reach the persons who afterward became lot holders. Future purchasers of lots had a right to know just what the condition was. The burden of proof on this point is on the promoters. There is not only a deficiency of proof on their part, but, quite on the contrary thereof, all the lot holders who were called to testify to this point stated that at the time they purchased their lots they knew nothing about the 10 per cent. interest or anything about the financial condition of the association. There can be no ratification without full knowledge on the part of him who ratifies, and all these attempts lack one essential element, viz., a full and complete disclosure of all the facts concerning which the ratification is asked. I therefore conclude that there has been no efficient ratification by any competent authority to sustain the acts which are now complained of. [6] The second covenant, which creates what was called in the case the "10 per cent. interest," rests upon a much less secure gages then on the land amounting to $32,000 of principal. Inasmuch as these mortgages have been paid off and discharged of record, there seems to be nothing in this covenant for the consideration of the court. During the ten years or thereabouts that this cemetery association has been in operation it has been subjected to a continual loss, for the reason that the regular income from the sale of lots, after deducting 60 per cent. thereof for the land purchase shares and the 10 per cent. interest, was insufficient to meet the necessary expenses of conducting the business. shares. There is absolutely no statutory or other authority for the making of such a covenant. It is not mentioned in the resolution by virtue of which the lands were purchased, and no display of it appears ever to have been made by the promoters. By virtue of this covenant the association is claimed to have bound itself to pay William F. Smith, the grantor, one-tenth of the gross proceeds of the sale, lease, or loan of burial plots in the cemetery. In forcing this deed and this covenant on the cemetery association Smith seems to have deceived even his own board of uninterested directors. That 10 per cent. interest early in the history of the cemetery [9] The board of trustees therefore authorassociation was divided into four shares, ized the borrowing of money on what is which are now distributed as follows: One- known as loan certificates issued in denomfourth to William F. Smith, now held by his inations of $100, $500, $750, and $1,000, personal representatives; one-fourth to Doro- whereby the association promised to pay, thy A. Raymond, who subsequently married upon a certain date expressed in each cerRoswell E. Benedict; one-fourth to Clinton tificate, the face value thereof, with 6 per O. Smith, a son of William F. Smith; and cent. interest, semiannually; it reserving the one-fourth to Vernette E. Prentice. Not right to redeem the same on any interest day only should this covenant be wholly disal- at 102 and interest. There were three issues lowed upon the ground that it was fraudu- | authorized, one in 1902, another in 1906, and lent in fact, but also upon the further ground still another in 1910, the aggregate amount that it was a means by which a secret profit authorized being $100,000, only $84,900 of was obtained by the promoters of the en- which have been issued. These certificates terprise, and not only should the covenant be represent actual cash loaned and paid to the set aside on these grounds, but the promoters, cemetery association, with the exception that if they have received any benefit thereun- certain of the certificates were issued to cerder, should account to the cemetery associa- tain of the trustees at a discount of 10 per tion therefor. cent. It was argued that, inasmuch as there [7] The third covenant binds the cemetery appeared to be no express power granted to association not to divest itself of the title to cemetery associations to borrow money, such any part of the lands in question (with neg- borrowing could not take place lawfully, ligible exceptions) without the consent in and, if it did take place, it was ultra vires, writing of William F. Smith, his heirs, execu- and therefore void. This contention, howtors, administrators, and assigns, and in ev-ever, is not in accordance with the authorery case the association to pay one-tenth of the gross proceeds thereof to the said Smith. This provision is not authorized by the statute, is not mentioned in the original resolution for the purchase of the land, and is a restraint upon alienation, and is therefore void. Magie v. German Evan. Church, 13 N. J. Eq. 77, affirmed 15 N. J. Eq. 500. [8] The fourth covenant relates to setting aside of 15 acres of the cemetery land for the purpose of providing a fund for the perpetual care of the cemetery grounds. This land is to be selected by Smith in conjunction with any three members of the board of trustees of the association whom Smith shall appoint to act with him in the premises. Inasmuch as Smith, the grantor, has died without making any appointments of trustees or selection of plots for the purposes of the covenant, it would seem as if the provisions of the covenant have become obsolete, there being now no one who can appoint the trustees, and there being no trustees to make the selection. In my opinion, nothing can be done on behalf of either the grantor or grantee with relation to this covenant. The fifth and last covenant is an assumption by the cemetery association of the mort ities. The right to borrow money to carry on the objects and purposes of the corporation is implied from the authority to do business as a corporation. It was supposed on the argument that there was a difference between the ordinary business corporation and a cemetery corporation in this respect; but no difference is recognized in the leading case decided by our Court of Errors and Appeals in 1886. Fifth Ward Savings Bank v. First National Bank, 48 N. J. Law, 513, 7 Atl. 318. There Mr. Justice Depue holds that every corporation created for transacting business, unless restrained by its charter, or some statute, has, as a necessary incident, the power of incurring debts in the course of its legitimate business, and of making and indorsing negotiable paper in payment of such debt. See, also, Lucas v. Pitney, 27 N. J. Law, 221; National Bank v. Young, 41 N. J. Eq. 531, 7 Atl. 488; Hackettstown v. Swackhammer, 37 N. J. Law, 191. So long as the borrowing of money is for the legitimate purposes of the association, the act is intra vires, and therefore valid, but the argument against these certificates is foreclosed by the cemetery act itself, which recognizes the fact that a cemetery company may contract allow an amendment changing the declaration is immaterial. [Ed. Note.-For other cases, see Appeal and Error, Cent. Dig. 88 3331-3341; Dec. Dig. $ 843.*] 2. APPEAL AND Error (§ 1041*) — HARMLESS ERROR-DECLARATION-AMENDMENTS. debts, and in section 16 it provides a drastic method by which such a corporation can be compelled to pay debts contracted by it out of its profits. If it could not contract debts, there would be no need of any method of collecting debts from it, because there could be none to collect. The implication of power Where the issue tried was that raised by therefore seems to be complete. These cer- the original declaration and the pleading by detificates must stand as debts or obligations of an amendment to the declaration so as to fendant thereto, the allowance during the trial of the association for the amounts respec- restore it to its original state, after the allowtively advanced thereon by the original pur-ance of an amendment changing the declarachasers thereof. Not being negotiable instruments, a defect in the original issue will affect them in the hands of the present own ers. tion, was not prejudicial to defendant. Error, Cent. Dig. 88 4106-4109; Dec. Dig. 3. SALES ( 363*)-ACTION FOR PRICE-EVI DENCE. Where, in an action for brick sold, the quantity of brick delivered was shown, and the bills and statements rendered by plaintiff to defendant were not objected to, but defend pay the balance, the amount sued for, the it likewise appears that the association owed promissory notes to the amount of $39,813. In so far as these notes represent money actually loaned to and received by the association, they must be held to be its law-ant paid on account and repeatedly promised to ful obligations, and inquiry should be made by a master to ascertain the amounts due upon these various kinds of obligations; if, however, the notes which were testified to include the notes given by the company to the shareholders in lieu of the distribution of cash, such notes should be canceled; otherwise the amount will stand as a double liability of the association. These views lead to the following results: (1) The 4,000 shares taken by the promoters as a secret profit, in so far as they can be traced and recognized, must be canceled in the hands of their present owners. (2) The 5,000 shares which were donated to and sold for the benefit of the association must stand as 5,000 shares in the actual value of the land at the time of its purchase, each of the 4,000 shares being entitled to 1/9000 part of the proceeds of the sale of the lots. There will be a reference to a master to ascertain this actual value. (3) The so-called 10 per cent. interest will be canceled absolutely. (4) There will be a reference to ascertain the amount actually owing by the association on the loan certificates and promissory notes. This amount, when so ascertained, shall be recognized as indebtedness of the association. (5) The receiver will be requested and authorized to report to the court a scheme for the resettlement of the trust fund and the readjustment of the association's affairs. If there are any other questions which need to be decided now they can be mentioned at the time of the settlement of the decree. 4. EVIDENCE (§ 256*)-ADMISSIONS. Where a contract signed by plaintiff was excluded because of plaintiff's inability to prove its execution by defendant, defendant was not ments by plaintiff, without proof that it was entitled to introduce the contract as recognized by both parties. state The buyer of brick cannot defeat an action for the price on the ground of misrepresentation by the seller as to their quality, where the brick was bought for paving city streets and was precisely that called for by the paving specifications; the buyer not being responsible further for the quality. [Ed. Note.-For other cases, see Sales, Cent. Dig. §§ 79-83; Dec. Dig. § 40.*] Walker, Ch., and Gummere, C. J., and Swayze and Parker, JJ., dissenting. Appeal from Supreme Court. Action by the Mach Manufacturing Company against Daniel Donovan. From a judgment for plaintiff, defendant appeals. firmed. Af Merritt Lane, of Jersey City, for appellant. Roberson & Demarest, of Jersey City, for respondent. KALISCH, J. This is an appeal from a Judgment entered upon a direction of a verdict for the plaintiff, for $1,415.90. The action was brought to recover for bricks sold by the plaintiff to the defendant. The defendant had a contract with the city of Bayonne to pave certain streets, and the plaintiff's brick was approved and adopted for the work. The original declaration filed contained the common counts, with a bill of particulars annexed. The record does not show that any plea was filed, but only a notice of recoupment, and which sets out that there was a special contract under which the brick was furnished. Thereafter the plain |