Εικόνες σελίδας
PDF
Ηλεκτρ. έκδοση

chaser of the trust property, such act is, plainant that the trust relationship which voidable at the instance of the cestui que existed between the corporation and defend. trust. The rule is adopted from wise con ant Marr, as its president and one of its siderations of public policy, with a view to directors, denied to him the right to become remove from transactions by trust agents a purchaser at the sale made under his exthe danger attendant upon the existence of ecu on. personal interests inconsistent with trust I have not been able to reach the concluduties. In Staats v. Bergen, 17 N. J. Eq. sion that the principles already stated can 554, 559, the learned Chief Justice, speaking be properly extended to render such a sale for the Court of Errors and Appeals, said: invalid at the mere option of the corporation

“I think, upon correct principle, a trustee or its stockholders. Conditions may easily in no case, nor in any crisis, can become the exist to justify a decree setting aside such purchaser of property, when the fact of a sale, for the purchase of the property of his making such purchase has a tendency to a corporation by its director, even under the promote his own interest, at the expense of circumstances named, may appropriately subhis cestui que trust. This, it is conceived, ject the transaction to the closest scrutiny is the groundwork of the decisions in Eng. in all its aspects as to fairness and good land and in this country.”

faith; but I entertain the view that something The rule has been uniformly applied in more is necessary to set aside such a sale this state to purchases by a trustee at pub than the mere exercise of a purpose to do so lic sales, and also at judicial sales to the upon the part of the corporation or its same extent as to sales made by the trustee, stockholders. To deny to the judgment credin cases where the purchaser has a duty to itor the privilege to buy at such a sale is to perform in reference to the sale inconsistent deny to him a substantial right which may with the character of a purchaser. Staats be essential to the effective enforcement of V. Bergen, supra; Marshall v. Carson, 38 his judgment. His attitude of hostility to N. J. Eq. 250, 48 Am. Rep. 319; Romaine v. his corporation has, in such a case, become a Hendrickson's Ex'r, 27 N. J. Eq. 162; Crev necessity which has been brought about and eling v. Fritts, 34 N. J. Eq. 131; Porter v. made necessary by the wrongful conduct of Woodruff, 36 N. J. Eq. 174; Deegan v. Cap the corporation. I find it difficult to recogner, 44 N. J. Eq. 339, 15 Atl. 819.

nize the undoubted right of a director to A director of a corporation is not a trus occupy the attitude of hostility to his cortee in the strict sense. The title to the cor poration which arises in the enforcement of porate property is in the corporation. But his claim by an action at law to compel paythe duties which a director is required to ment, and to deny to him the right to enperform for the corporation which he repre force the judgment procured with all the sents are in many respects similar to the privileges which are incident to the judgduties of a trustee, and his relation to the ment. In the exercise of that attitude of corporation is, in general, essentially that hostility which is made necessary for the of a trustee. He is not, in consequence, al enforcement of his just claim against his lowed that freedom to contract with his cor corporation, it would seem that he should poration which a stranger could enjoy. In be entitled to the full privileges of a stranger, Stewart v. Lehigh Valley R. R. Co., 38 N. J. not only in the prosecution of his action, Law, 522, it is shown that his trust relation. but as well in the enforcement of his judgship to his corporation is such as to render ment. If the evidence discloses that he has his contracts made with it voidable to the ex in fact exercised no other privileges, I think tent that such contracts cannot be enforced, the sale should stand. It is urged by comas express contracts, against the will of plainant that he should first resign, and thus tbe corporation. He may loan money to his render himself free to act. Such a course corporation or perform personal service for would ordinarily be empty and fruitless, and his corporation and the obligation for the equally subject to judicial investigation. repayment of the money loaned, or for the When the facts disclose that he has not used payment of reasonable compensation for the his office to his own advantage, I cannot service performed, will arise by operation recognize the necessity or propriety of the of law, but cannot exist by force of the ex application of a principle which operates, press contract. Gardner v. Butler, 30 N. J. in such a case, to render the sale invalid at Eq. 702, 721.

the mere instance of the corporation. In In the present case defendant Mart, while treating such sales as voidable, I think they a director, loaned to his corporation money should be so treated only to the extent that which was at that time needed by the cor other judicial sales are so treated. If an poration, and which was used by it in its inadequate amount has been bid, the law regular business. After repeated efforts up court from which the execution issued can on the part of defendant Marr to induce the afford an adequate remedy. Palladino V. corporation to repay the money due to him, Hilpret (N. J. Ch.) 65 Atl. 721. If unfair he was compelled to bring suit and to issue advantage has arisen attributable to a trust execution on the judgment procured and relationship, this court can appropriately make sale of the property of the corporation. / grant relief. It is now contended upon the part of com I have found but little assistance in the

adjudicated cases upon the subject. The that the sale will not be set aside because case of Twin-Lick Oil Co. v. Marbury, 91 of his trust relationship arising from the fact U. S. 587, 23 L. Ed. 328, which is frequently that he is a director, unless it appears that cited in support of the right of the director some undue advantage has been taken by him creditor to purchase, goes no further than to by reason of the position which he occupies. support the right in the case of a sale made It is urged in behalf of complainant that by the trustee of a mortgage deed given by the conduct of defendant Marr was not fair the corporation to secure a debt due to the and open, in that he should have given notice director; and the suggestion is there made of the sale to all the stockholders. I am unthat the trustee making the sale is appointed able to concur in that view. From the eviby the corporation for the purpose and to dence adduced at the hearing, I am satisfied that extent represents the corporation. Salt that defendant Marr must be regarded in marsh y. Spaulding, 147 Mass. 224, 17 N. E. this case as the victim of the corporation 316, is to the same effect as Twin-Lick Oil Co. rather than as one who has received undue v. Marbury, supra. The case of Lucas v. Fri advantage. The corporation had but few ant, 111 Mich. 426, 436, 69 N. W. 735, ex stockholders, and was essentially the enterpressly holds that a director who is a judg. prise of a brother of defendant Marr, now ment creditor may buy at the execution sale; deceased, whose stock complainant now holds but the decision is based on Twin-Lick Oil by inheritance. Defendant Marr originally Co. v. Marbury and Saltmarsh v. Spaulding, advanced a small amount of money to the supra, and other cases which do not fully corporation, and also became a stockholder support the text. The case of Hoyle v. at the instance of and as a favor to his Plattsburgh & Montreal Ry. Co., 54 N. Y. brother. As more money was needed by the 315, 329, 13 Am. Rep. 595, after holding that corporation from time to time, defendant a director, who is not a judgment creditor, Marr was induced to make further advances, cannot purchase the property of his cor because no other person identified with the poration at a judicial sale, proceeds as fol enterprise appeared to be able to do so and lows:

because of his desire to help the enterprise "Vilas, however, was not only a director. along on account of his brother's active He was also the plaintiff in a judgment interest in it. The advances thus made finalagainst the railroad company, and had a ly aggregated over $10,000, and over $2,000 clear right to sell, upon execution on his had in the meantime, in like manner, been judgment, the personal property of the cor advanced by the mother of complainant poration which was liable to sale on execu Marr. After the death of his brother de. tion. Whether in this right he might not, fendant Marr, at a meeting of the stockholdat a sale under his own or under prior ex ers in December, 1897, stated that he must ecutions, purchase in protection of his own have the money due to him, and that he right as judgment creditor, and hold prop would proceed unless something was done. erty so purchased absolutely against the com He also urged the stockholders to contribute, pany, need not be determined in this case." and also offered to turn over his claim

The subsequent case of Preston v. Lough- | to any one who would supply the money. ran, 58 Hun (N. Y.) 210, 214, 12 N. Y. Supp. Again, at a meeting of the stockholders in 313, 316, refers to Hoyle v. Plattsburg & February, 1898, he urged payment, and statMontreal Ry. Co., supra, and proceeds as ed that he would proceed to collect unless follows:

paid. At one of these meetings a committee "He (the director of a corporation) not was appointed to make public sale of the absolutely excluded from the right of deal entire property of the company. The sale ing with it. He can loan money to it and was undertaken by a Philadelphia auction become its creditor, and he can receive by house in April, 1898, and no bids were rethe act of the corporation security for his ceived. Mrs. Marr had in the meantime debt. If he has a mortgage security, he may brought suit for the money due to her, and foreclose the mortgage, and it follows, al recovered judgment for $2,088.15. In Ocmost of necessity, that, if he can foreclose, tober, 1898, defendant Marr brought suit he may protect himself by bidding at the for the money due to him and recovered sale. Of course, if he takes any undue ad judgment for $10,318.30, and in December, vantage, another question arises. But when 1898, made sale of the property in question his acts are fair and open they are not in under an execution issued on that judgment. valid."

The judgment recovered by his brother's wife In Hallan v. Indianola Hotel Company, 56 had in the meantime been assigned to him. Iowa, 178, 9 N. W. 111, the same view is While no notice of the sale was given to the taken, and in Re Iron Clay Brick Mfg. Com several stockholders other than the statutory pany, 19 Ont. 113, 33 Am. & Eng. Corp. Cas. notice, I am entirely satisfied that it would 277, the contrary view is adopted.

have been utterly futile to have given such I think that both reason and authority notice. Dedendant Marr had earnestly tried must be said to support the view already to get the stockholders to interest themselves stated that a director in the enforcement of in raising the money due to him, and had his execution against his corporation is privi found it impossible. It is entirely clear to leged to purchase at the execution sale, and me that, bad each stockholder been personal

ly notified of the day of sale, no attention | probably be enforced by judgment. He testiwhatever would have been given to the mat fied: “I inferred that there would be a ter by any of them. Defendant Marr did not suit by the Judge and a sale of the property." want the property. He was judge of a court I will advise a decree dismissing the bill. in Pennsylvania and did not wish to be burdened with the ownership of a seashore hotel property, and especially one which had

( N. 8. Ea. 686) been found from the beginning to afford in STEVENSON V. MARKLEY et al. sufficient revenues to maintain it. His in

(Court of Chancery of New Jersey. March 7, structions to the attorney whom he employ

1907.) ed to make the sale were to let the property 1. EQUITY PLEADINGS - OBDER ALLOWING be sold for less than was due on his judg

AMENDMENT. ments if a purchaser could be found. I am

An amendment to a bill, intended only to

strengthen matters alleged in the original bill, satisfied that the only reason that all par

is not permissible under an order granting comties in interest were not especially notified of plainant leave to amend by inserting in the bill the sale was because it was useless to do so. allegation excusing the delay in the bringing of

the suit. The property was purchased by defendant Marr at the sale because, and only because,

2. SAME-MOTION TO STRIKE-DISCRETION OF

COURT. no other purchaser could be found. No bid Whether a court will strike out a bill on was made except that of defendant Marr. the allegation of laches is a matter of discretion, Since the purchase defendant Marr has found

and the court will generally permit the proving

of the facts excusing laches and determine it necessary to continue to add to the invest

whether such facts excuse. ment in the hope of making the property re 3. GUARDIAN AND WARD-SUIT FOB ACCOUNTmunerative, and at this time it stands him in ING-JURISDICTION. about $40,000. I am unable to find any cir

A suit by the representative of a deceased

ward against the representative of the deceased cumstance from which I can conclude that

guardian for an accounting is not properly cogdefendant Marr has not performed his full nizable in the orphans' court, and is within the duty to the corporation.

jurisdiction of a court of equity. Touching the value of the property pur

[Ed. Note.-For cases in point, see Cent. Dig.

vol. 25, Guardian and Ward, 88 477, 479.] chased, I think that, in the proper hands,

4. SAME RELATIONS -- TERMINATION-RUNa purchaser could have probably been found

NING OF LIMITATIONS. for more than the amount of the judgments A guardian receiving property of a ward beof defendant Marr. Witnesses at the hearing comes a trustee for the ward until a proper acbelieve that the property at the date of the

counting is had, and the fact that the ward acsale, was worth at least $25,000. At the sale

quires the right to call for an accounting at a

particular time does not fix such time as a attempted in Philadelphia $18,000 was fixed period from which either the statute of limitaas the price at which it should be sold. tions or equitable principles in analogy thereto There was due to defendant Marr at the sale

apply.

[Ed. Note.-For cases in point, see Cent. Dig. about $12,500. His bid was but $3,850. The

vol. 25, Guardian and Ward, 88 483, 491.) small amount was bid because there were no

5. LIMITATION OF ACTIONS_STATUTES-EQUIother bidders, and it was sought to save TABLE SUIT FOR ACCOUNTING, sheriff's commissions. The bid was, in ef Gen. St. p. 5, gives a right of action for fect, from the standpoint of defendant Marr,

an account against a guardian, and page 1974,

& 8, provides that an action of account shall be the amount of the judgments, as the corpora

commenced within six years next after the tion had no other assets. If the property was cause of action shall have accrued. Held, that in fact worth $25,000 at the date of the sale, a suit in equity to compel a guardian to account it is entirely clear that neither defendant

is not barred by the statute. The fact that a

court of law acquired jurisdiction by the stat. Marr or any one else connected with the cor ute did not apply to the jurisdiction of equity poration had any such idea of its value. It previously existing. is not improbable that subsequent develop 6. Same. ments have given an enhanced idea of values

A ward attaining her majority in 1883 died

in 1885, before the guardian had rendered an in the retrospect. But, as already stated, I account. The guardian died in 1905. In 1906 do not conceive it to be the duty of this court an administrator of the deceased ward was apto disturb this sale, under the circumstances pointed, who, in the same year, sued the repre

sentative of the deceased guardian for an acof this case, on the ground of inadequacy of

counting. Held, that the suit was not barred price.

by limitations, though the cause of action acThe bill is filed at this late date-seven years crued on the ward's death, since limitations did after the sale by the heir of the brother of

not begin to run until the appointment of her defendant Marr on reaching his majority.

representative.

(Ed. Note.-For cases in point, see Cent. Dig. At the time the transactions here occurred vol. 33, Limitation of Actions, $ 427.] complainant had a guardian who attended the stockholders' meetings referred to at

Suit by Richard G. Stevenson, administrawhich proceedings were threatened to en

tor of Mary Markley, deceased, against Paul force the Marr claim. While I am not in

H. Markley and another, executors of Mary clined to deny relief upon the ground of

Josephine Markley, deceased. On motion to laches, tbe evidence clearly shows that the

strike out, bill denied. guardian of complainant had ample notice F. D. Weaver, 'for complainant. H. M. to apprise him that the Marr claim would Cooper and H. A. Drake, for defendants.

GARRISON, V. C. (orally). This is a hear. ing upon a motion made by the defendants for leave to withdraw their answer to the original bill, and to move to strike out the bill for want of equity, and various parts of the bill for specific reasons stated.

Upon a hearing had on the 10th day of December, 1906, it appeared to the court that the face of the bill disclosed a cause of action so old that, in default of explanation, the court would be inclined to dismiss the same for laches if the defendants had so moved the court. The court, not finding among the reasons or objections of the defendants any one based upon laches, and the complainant moving for leave to amend by setting up facts explaining the laches, the latter motion was granted, and an order of the 10th of December, 1906, was entered. That order, in so far as it is now material, provided that the complainant “have leave to amend his bill by inserting therein such charges as he may be advised or able to do concerning the reasons for the delay in the bringing of his suit.” And it was further therein ordered that all other proceedings should remain in statu quo. Thereafter the complainant filed amendments, which he has numbered 14a and 14b, and upon the amended bill the defendants have now moved, under rule 213, to strike out this bill and various parts thereof. I am inclined to the opinion that the amendment numbered 14a is not within the permission of the order of the 10th of December. It does not seem in any way to set forth, or could it be considered as giving, a reason for the delay. It apparently is some additional allegation concerning some of the previous matters alleged in the bill, and is evidently intended to strengthen the charges of the bill in these respects. That was not within the purview of the order made on the 10th of December, and the complainant, under that order, cannot claim the right to make this amendment. If he has the right, it must be asserted in a

leged in this paragraph. That matter seems to have been inserted wholly under the permission of the court as a reason or explanation of his delay in bringing suit upon the cause of action which is urged in the bill, and for which appropriate relief is prayed in the prayer thereof. With respect to the matter of the statute of limitations applying, I have examined this matter with great care, and have read most, if not all, of the authorities, and considered them very carefully. The matter is an open one in New Jersey, and is in grave doubt. I am rather inclined to think that our courts should follow the English and New York courts in holding that the relation of guardian and ward is a continuing trust, and that until the guardian settled with the ward or the ward's representatives it must be held to be a continuing, direct trust, which is not affected by the statute of limitations. This, of course, is in a case where the guardian has not denied the ward's right and has not taken a position of antagonism, from the time of which open expression of antagonism the statutes of limitations or imputations of laches are always held to run. Therefore I am not going to strike this bill out either for want of equity or because barred by the statute of limitations, or because the allegations of the amendment 14b are incongruous with the main cause of action set up in the original bill. The defendants have answered so much as was in the original bill, and their answer may stand, if they so desire, or they may make a totally new answer to this bill as amended.

I do not wish by this decision to be understood as determining that the matter in 14b which is permitted to stay in the bill as an amendment is a satisfactory answer to the charge of laches, or that the court may not, on final hearing, reach the conclusion that there was laches; but I am disinclined to absolutely deprive the complainant of his day in court upon the ground of laches, in the face of a charge in the bill that there was some sort of an agreement or understanding between him and the person whom he seeks to hold as trustee concerning the subject-matter of the trust, which, when disclosed in detail, may explain or excuse the delay. Whether a court will strike out a bill, or sustain a demurrer-which is the same thing-upon the allegation of laches, is, of course, a matter of discretion, and I do not think it would be discreet, legally speaking, to prevent this complainant from proving the facts, after which it will be entirely open to the court to determine whether such facts excuse or fail to excuse the long delay which has ensued in the asserting of his rights. I do not mean his rights as administrator, but his right as husband of the deceased wife to take all her personalty and to have administration. He had this right from the date of her death in 1885, and did not actually take out letters until 1906. It may be that upon final

proceedingt where that matter comes directie fac

under consideration. I will therefore grant the motion to strike out the amendment numbered 14a.

The other general heads are that the bill does not show equity; that because the thing sued for is a sum of money due the representative of a deceased ward by the representative of a deceased guardian, and is therefore an action of account, it is claimed by the defendants that suit must be brought thereon within six years under the statute of limitations. It is also claimed that the complainant is in laches unexplained, and that there is therefore no equity in the bill. It is further claimed that by the amendment 14b the complainant sets out another cause of action than that previously pleaded, and an incongruous one with respect to the latter. I do not find that the complainant has changed his prayer in the least, nor that he prays any relief with respect to this matter as al

hearing the court will hold that his delay in suit is barred. There are certain well-settled this respect defeats his right. But, as just principles of equity which it is only necessary said, I think it more appropriate to consider to refer to briefly. and decide this upon final hearing, and after A court of equity undoubtedly has jurishe has had opportunity to make proof of the diction over the accounts of guardians unexcuses for delay that he offers. The above der the general jurisdiction over trustees; was the oral deliverance of the court at the a guardian being held to be a trustee in the time of disposing of the motion at the ar fullest sense of the word. In re Hannah gument. Having been notified that an ap Barry, 61 N. J. Eq. 135, 47 Atl. 1052 (Emery, peal has been taken by the defendants, I V. C., 1900); Sleeman v. Wilson, L. R. 13 Eq. think it due the reviewing court that a more 36; Perry on Trusts, vol. 1, p. 526, 8 430; extended statement of facts and law be given 16 Am. & Eng. Ency. of Law (2d Ed.) p. 75. with respect to the important question dis It is true that this jurisdiction will not be posed of.

exercised saving in exceptional cases, and orThe essential facts are as follows: Mary dinarily an accounting between guardian and Josephine Markley was the mother of Mary ward should take place in the orphans' court; Markley, and was appointed her guardian by but I apprehend that the same rule with rethe orphans' court of Camden county about spect to the application or nonapplication of October 6, 1876, and, as such guardian, there the statute would apply in the orphans' court was paid to her for the ward the sum of as in this court. But the suit at bar is not $4,087.14. Mary Markley, the ward, came of one properly cognizable by the orphans' court, age on the 13th day of January, 1883. She because it is not between a guardian and married Richard G. Stevenson on the 26th ward, or between a guardian and the repreday of March, 1885. She died on the 25th sentatives of a deceased ward, but is between day of December, 1885. There was no ac the representatives of a deceased ward and of counting between her and her guardian. Her a deceased guardian. mother, the guardian, died on the 26th day The determination of the whole question of February, 1905. Richard G. Stevenson, depends, in my view, upon whether the re the husband of the deceased ward, was ap lation between a guardian and ward is held pointed her administrator on March 1, 1906. to be a trust relation; that is, a direct, conThis suit is for an accounting, and was tinuing, subsisting trust. If it is, then the brought by Richard G. Stevenson, the admin authorities are clear that the statute of limiistrator of the deceased ward, against the tations does, not apply. There can be no executors of the deceased guardian, some doubt, I think, that the relation between time in the summer of 1906.

guardian and ward is a trust, and is a direct, It is the contention of the defendants that subsisting, continuing trust. Some courts, this suit is barred, either directly by the however, hold that the trust terminates at statute of limitations or by the application the majority of the ward (15 Am. & Eng. by a court of equity of principles in analogy Ency. of Law, p. 82, note 1), and others have to the said statute. It should first be ob even fixed the period of the termination of served tbat there are two periods to be con the trust with respect to a female ward at sidered and two different sets of parties, and the date of her marriage (Id.). In some ju. that different principles are therefore ap risdictions, therefore, it is held that when plicable. First, there is the period between the ward comes of age, or marries, the trust the coming of age of Mary Markley, the ward, relationship ceases, and the statute of limion the 13th of January, 1883, and the time tations, or principles in analogy thereto, apof her death on the 25th of December, 1885. ply, and an action will not lie for an ac During that period the parties concerned counting after the period of limitation pro were the ward and the guardian. If the stat. vided. Id. But other courts hold that the ute of limitations had begun to run then, relation is one of trust, and is direct, subthe death of the ward would not toll the sisting, and continuing until there is an ac. same. This is too well settled to require cita counting (Mathew V. Brise, 14 Beav. 341; tion. After the last-named date, and up un Matter of Camp, 126 N. Y. 377, 27 N. E. 799), til the death of the mother, the guardian, on although in a previous case in New York an the 26th of February, 1905, there was no one opposite view had been distinctly taken and in existence in whom was vested the rights held in the case of Bertine v. Varian, 3 Edw. of the deceased ward against her guardian. Ch. 343. This case was cited to the court Sucb a person did not exist until the 1st of in the Camp Case, and was, of course, disMarch, 1906, when an administrator was ap regarded. See, also, Pyatt v. Pyatt, 46 N. J. pointed for the estate of the deceased ward. Eq. 285, 18 Atl. 1048. The principle upon At that time the guardian had also died, so which these last-cited cases go is that where that the parties had completely changed, and the guardian receives property belonging to the parties were, as above stated, an admin the ward, he becomes a trustee for the ward istrator of a deceased ward on one side, and with respect to such property, and remains the executors of a deceased guardian upon such trustee, subject to all the incidents the other. If the statute began to run at thereof, until a proper account is had between the death of the ward notwithstanding that him and the ward, and that the fact that the no administrator was appointed, then this ward acquires the right to call for an ac

« ΠροηγούμενηΣυνέχεια »