Case ID: nj-eq_6/html/0063-01.html
Source: Caselaw Access Project
Author: {"author": "The Chancellor.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHN P. OUTWATER AND OTHERS v. ABRAHAM I. BERRY AND OTHERS.
    1. Sale of real estate by a trustee set aside.
    2. Supplemental bill, nature of.
    3. Process on the original bill should be served before a supplemental bill js filed.
    4. Circumstances under which the want of subpoena on the original bill was held not to be good ground of general demurrer to the supplemental bill.
    5. A general demurrer bad in part will be overruled.
    On the 26th January, 1844, John P. Outwater and others, stockholders of “ The New Barbadoes Toll Bridge Company,” for themselves and all other the creditors and stockholders of the said company who should come in and seek relief by and contribute to the expense of the said suit, exhibited their bill, stating the incorporation of the said company by an act passed February 16th, 1816, and setting out the provisions of ihe act and of the several supplements thereto. Thát, by virtue of the last supplement, the corporation continued, and the road and bridges of the company continued to be used as a line of public travel, and the company continued to keep up their toll-gate aud to collect the tolls. That the company had not compkted their road and bridges on the 18th February, 1843, as required by the last supplement, and that the time for completing the same has not been further extended by any act of the legislature; and that, by reason thereof, the act of incorporation ceased and became of no effect, and the corporation became dissolved on the said 18th February, 1843. That the company, at the time of its dissolution, as aforesaid, were seized and possessed of considerable real and personal estate, and that large sums of money then were and still are due to it, and that the affairs of the company then were and still are in an unsettled state. That, at the time of said dissolution, George Van Riper was, or pretended to be, president of the company, and John A. Berry, Evander Berry and George Bell were, or pretended to be, directors thereof, and Abraham I. Berry was, or pretended to be, treasurer of the company; but how appointed, respectively, except as afterwards stated in the bill, the complainants know not, and have no means of discovering ; nor have they been able to discover who the other directors And officers of the company were at the time of the dissolution, if any such there were. That John A. Berry and Abraham I. •Berry, both before and at the dissolution, and from thence hitherto, had, or pretended to have, the entire control and management of the affairs of the company; that they began to exercise such entire control in May, 1837; that during the whole of that period they collected all the tolls, averaging from $1200 to $2000 a year, without accounting for a dollar, and have proceeded therein a3 if they were the only parties interested in the company; and that they refuse to come to any account. That when said John and Abraham assumed such control, one D. K. Allen was treasurer of the company, and' had in his hands about $1000 of the money of the company; and that said John, with the consent of said A.braham, took the said money from Allen and appropriated it to their use, and applied it in the purchase of stock of the company. That the said John did not take a transfer of the stock, so purchased, in his own name, but only proxies; that he also transferred stock to the names of others, who paid nothing for it, and did not pretend to own it; and, after such transfer, took their proxies for the same. That this was done to secure to himself as large a number of votes as possible. That this whole scheme was devised by the said John and Abraham, with the fraudulent intent of securing to themselves the exclusive control of the affairs of the company; and that it did so. That during the period they had such control, the said John transferred stock to persons who did not pay for, or pretend to own it, solely with the view to elect such persons directors. That said nominal directors were the relations of said John, and that said Evander Berry and George Bell resided and still reside in the State of New York, and took no interest or concern in the affairs of the company. That said John and Abraham, while they had such control, suffered the road and bridges of the company to go to decay, by reason whereof travelers met with accidents and losses. That before the dissolution, a suit was brought in the Supreme Court against the company by C, G. Jabin, for injuries sustained by him while traveling the road, during the time the said John and Abraham had such control and management; in which action a verdict for §357 was recovered against the company, in January, 1843; on which verdict judgment was entered, March 1st, 1843, after the dissolution of the company, with §77.84 costs. That a fi. fa. was issued on the judgment, returnable to February Term, 1844, which was levied on so much of the road and bridges of the company as are situated in the county of Hudson. And the complainants insist, that such judgment, execution and levy, after the dissolution of the company, were irregular and illegal. That the said John and Abraham have not, nor hath either of them, accounted for the said money so received from Allen, or any part of it. That on she 17th of February, 1843, there was recorded in the clerk’s office of Bergen, a deed dated February 15th, 1843, purporting to be made by the company to Abraham I. Berry, stating that the said act would become void on the 18th February, 1843, by reason of the road ami bridges not being completed, and that it was doubtful whether the trustees of dissolved corporations, designated by the act entitled “ An act for the relief of creditors against corporations,” have power, after the dissolution of such corporations, to sell and convey their real estate; and that it was equitable and just that, on the dissolution of the company, their real estate should be fairly sold, and the proceeds thereof paid and distributed to the creditors and stockholders, in the manner and order mentioned in said act; and conveying to said Abraham all the lands and real estate of the company and their rights and franchises, in trust, until the dissolution, to permit the company to receive the tolls, and after the dissolution, in trust to sell the same, in such parcels, at such times, and in such manner as may be directed, from time to time, by the persons who may, at the time of the dissolution, own a majority of the stock, and to pay the proceeds to such person or persons as by the act last mentioned aré declared to be the trustees of said company when dissolved ; to be by them appropriated as the other property of dissolved corporations is in said act directed to be appropriated by such trustees; he, the said Abraham, first retaining the expenses of the sales and of executing the trust; which deed was signed by George Van Riper, the seal of the county being affixed, the acknowledgment stating that he had signed and sealed it by the order of the directors.
    The bill denies this, and charges that the said deed was fraudulent, and was made for the purpose of enabling the said John and Abraham to have, notwithstanding the dissolution of the company, the entire control and enjoyment of the property of the company. That the said John and Abraham, since the dissolution, have kept, and still keep up a toll gate, ana collect tolls, and apply the money to their own use. That they refuse to account, or show the books of the company. That since the 1st of January, instant, (January, 1844,) advertisements have been posted up in two or three places in the county of Bergen, that the said Abraham, as trustee of the company, will sell at public auction, on the 5th of March, 1844, at, &c., all the right and title to the road, real estate, bridges, and fixtures of the company. The bill prays an account; and that the complainants may be paid what is due to them; and that the said deed may be declared to be fraudulent and void; and that a receiver may be appointed, &c.; and that the defendants may be enjoined from receiving any of the debts, and from conveying or encumbering any of the property of the company, and from collecting any tolls, and from exercising any of the franchises granted by the said acts of the legislature.
    
      On this bill, an order was made, dated January 26th, 18 44, that the defendants show cause, on the 10th February, 1844, why an injunction should not issue and receivers be appointed; and that notice of the hearing be given by service of a copy of the order on such of the defendants as reside in this state.
    The application for an injunction and receivers was resisted, and on the hearing, the affidavits of John A. Berry and Abraham Berry were read in opposition; and the Chancellor, on the 12th April, 1844, made an order refusing the application, and directing the complainants to pay to the defendants, John A. Berry and Abraham I. Berry, their costs in opposing said application.
    After the filing of this bill, the sale of the road and bridges, as advertised as aforesaid, was adjourned to April 25th, 1844; and on that day, the said Abraham, acting as trustee under the said deed, struck off and sold the same to the said John A. Berry for $910.
    On the 30th August, 1845, a supplemental bill, or bill so called, was filed, stating the contents of the original bill and the proceedings thereon; and stating that, since the filing of the original bill, the sale, as advertised in the manner stated in that bill, was adjourned to April 25th, 1844, and that on that day the said Abraham exposed the said road and bridges for sale, at public auction, under the following conditions of sale, giving a copy of the conditions of the sale.
    The 3d condition was, “ Ten per cent, of the purchase money to be paid in cash at the close of the sale, and the residue upon the delivery of the deed.”
    The 4th was, the deed to be delivered in 30 days, and would be a deed of bargain and sale, with covenants against the acts of the grantor.
    The 5th was, that any purchaser neglecting to pay at that time, should forfeit what he had before paid and his right to the purchase, and be liable to make good any loss on a re-sale.
    That few persons attended on the day of sale. That two individuals, whose names are not known to complainants, were evidently hired by the said John and Abraham, or one of them, to attend, and were paid for their attendance by their direction, or that of one of them, as the complainants are informed by the toll-gatherer, and believes, out of the funds of the company. That when the property was put up for sale, and. the conditions read, the said Abraham having refused to permit the said Peter to see the conditions before, the said Peter told the said Abraham that he came there intending to bid, but was not prepared to pay ten per cent, in cash down, and requested an adjournment for a fortnight, which was refused. That the complainant, John P. Outwater, then- asked said Abraham if he would take the joint note of him and Peter Outwater for the ten per cent., payable in two weeks; and the said Abraham refused. That said Peter then offered to bid for said road and bridges $6000, and give such joint note for the ten per cent., payable in two weeks, and to comply in all other respects with the terms of the sale; and that this also was refused by the said Abraham. That said Abraham then put up the property for sale, and struck it off to the said John -A. Berry, his father, for $910.
    The bill charges that the sale was a mere form, and fraudulent, being designed to carry the appearance of fairness without intending that any other person than the said John, or some person acting in concert with said John and Abraham, should become the purchaser. That the note of P. Outwater and John P. Outwater for the ten per cent., or the entire $6000, or a much larger sum, was good, and so known to be by said Abraham and John. That John A. Berry, as the complainants are informed and believe, did not pay the ten per cent, on his purchase at the time of the sale. That the complainants, or one of them, as late as six months after the sale, was informed by the said Abraham that the said John had paid nothing on the said pretended purchase.
    The bill charges that Abraham has made a deed to John for the property, but that the deed has not been recorded, to their knowledge. That after said property was so struck off to the said John, the said Peter Outwater offered to give $6000 for it, but the offer was refused by the said John.
    This bill prays that the defendants therein named, being the same defendants named in the original bill, may answer not only the supplemental, but the original bill also j and that the said deed made by Abraham to John A. Berry be set aside as fraudulent and void, and made for an inadequate price j and that John A. Berry may be restrained from conveying and encumbering the property; and that the deed made by the presiden i and directors of the company to the said Abraham E. Berry, im trust, may be given up and canceled, as fraudulent and void j and that the affairs of the company may be settled up, under the provision of the acts of the legislature, by the president and directors or managers of the corporation at the time of its dissolution, as trustees for said corporation, under the direction of a master, or by a master, under the directions of the court, and the property sold and the debts collected, and divided fairly among the stockholders, after paying the debts of the company, if there are any, and the costs and expenses.
    The bill prays an injunction and a subpoena against the said defendants.
    The subpoena issued on the filing of this bill was returned ser veil on George "Van Riper, John A. Berry and Abraham I. Berry ; the other defendants being’ returned not found.
    To this bill Abraham I. Bony and John A. Berry have filed separate general demurrers.
    
      P. D. Vromn, in support of.the demurrers.
    
      William Pennington, mntra.
    
   The Chancellor.

Several grounds were taken in support of the demurrer. One was, that there was no guarantee that the second sale should yield as much as the first j that the complainants made no offer to secure the amount brought at the sale which has been made. On the facts stated in the bill, and which the demurrer admits, no such offer or guarantee can be necessary. The bill states that a bid of $6000 was offered, and an unquestionable note, payable in two weeks from the day of sale, for the ten per cent, on that sum, the residue to be paid accord - ing to the conditions of sale. That this was refused, and the property was struck off by Abraham I. Berry, acting as trustee for the company, to his father, John A. Berry, for $910. The bill states that the ten per cent, was not required from the said John, and that he has never paid it, nor any part of the purchase money. The application to set aside such a sale, is very different from the ordinary application to open biddings. There was nothing urging the trustee, or justifying him in selling at such a sacrifice in the face of such an offer. I am of opinion there is nothing in the objection.

Another ground taken in support of the demurrer was, that the second bill goes on principles opposite and hostile to the ease made by the original bill, and does not accord with the original bill. The first bill seeks to set aside the deed made by the president and directors of the company to Abraham I. Berry as trustee for the company, with power to sell for the benefit of the company; and the second bill seeks to set aside the sale made by the trustee, after the filing of the original bill, on the ground that such sale was improperly and fraudulently made. I can perceive no hostility between the prayers of the two bills.

The second bill prays, also, that the trust deed to Abraham be set aside. This, it was argued, was incongruous. It does not so strike me. The trust deed to Abraham, and the sale made by him, may both be set aside; or the trust deed held good and the sale by the trustee under it be held void. The bills, taken together and considering one as supplemental to the other, seek, the first, to set aside the trust deed, and the second, to set aside the deed made by the trustee. Both may prevail, or the second may prevail though the first should not. I do not see that the mere introduction of a prayer in the second bill that the trust deed be set aside produces any fatal incongruity.

The other ground taken in support of the demurrer was, that no subpoena was ever served or issued on the original bill; that the complainants were therefore out of court, and not in condition to come in by supplemental .bill. It is true that subpoenas in the original suit should be served before a supplemental bill be filed. Mitf. Pl. 62, margin, note E.

If the second bill in this case is to be considered as strictly a supplemental bill, the questions to be decided would be, first, whether the want of subpoena in the original suit can be taken advantage of by general demurrer to the supplemental bill; and, second, whether the course taken by the defendants under the original bill and the proceedings had thereon were not equivalent to an appearance by the said John and Abraham to the original rill, or sufficient to prevent these defendants from taking advantage of the want of subpoena in the original bill, by general demurrer to the supplemental bill On the filing of the original oill, an application was made for an injunction. The Chancellor appointed a day for the hearing of the application, and directed notice to be given to these defendants. At the hearing they resisted the application, and put in their several affidavits in opposition to it. The Chancellor denied the application, with costs j and the defendants took an order that the complainants pay to them, John A. Berry and Abraham I. Berry, their costs in opposing said application, to be taxed ; and in the taxed costs they were allowed for a copy of the bill.

The second bill states the contents of the first bill, and the proceedings under it on the application for an injunction, and adds the new matter of the sale by Abraham, and prays that the defendants may answer both bills. The defendants John and Abraham demur generally to the second bill. No case was cited, nor have I been able to find any, in which, under such circumstances, a demurrer was allowed for want of a subpoena on the original bill. In this case no useful purpose would be served by allowing the demurrer on this ground ¡ and I am strongly inclined against it. I find a note of the case of Ogden t>„ Gibbons, in which it is said that Chancellor Williamson inclined to the opinion that a general demurrer was to be considered as a waiver of all defects in the service of a subpoena. It seems to me that, in all propriety, the objection should have been made early, and in another way ; and that it should not be allowed to prevail when, after the lapse of several terms, the cause is brought to a hearing on a general demurrer.

But there is another view of the ease on which, as it appears to me, the demurrer must be overruled. The first bill was filed to set aside the trust deed made to Abraham, After that bill was filed, Abraham, as trustee, conveyed the property to John A.; and the second bill seeks to set aside this conveyance from Abraham to John A. It is only in one respect that the second bill can be considered as supplemental. If, in order to set aside the deed from Abraham to John, it be essential that the trust deed to Abraham be set aside, then the second bill may be considered as supplemental. In pursuing the first bill, to set aside the trust deed to Abraham-, his conveyance to John A., after the filing of the first bill, occasioned an imperfection in the proceedings which it was proper to remedy by a supplemental bill. But if the trust deed to Abraham is good, there is nothing in the second bill of the character of a supplemental bill. In that case, it would be a sufficient bill for the purpose of setting aside the deed from Abraham to John. If the origina,! bill was dismissed because no subpoena was issued on it, would this second bill fall altogether ? Would the effect be anything more than that that part of it which asks that the trust deed to Abraham be set aside would fall, and be left for another suit ? So far as the second bill goes for the setting aside of the deed from Abraham, to John, it is a new case, not necessarily connected with the first bill; for, though the trust deed should be held good, the deed from Abraham to John might be set aside. The new matter of the second bill, that is to say, the deed from Abraham to John, may be tried and decreed upon, and the matter of the first bill, that is, the trust deed to Abraham, be left entirely untouched and remain the.subject of a distinct suit. If no decree could be made on the new matter stated in the second bill without decreeing that the trust deed to Abraham was void, then, unless the defendants were properly brought in under the first bill, the suit could not proceed. But the deed from Abraham to John may be void and the trust deed to Abraham may be good. At most, then, this second bill could only be demurrable so far as it relates to the matter of the first bill. But the demurrer is general to the whole bill, and being, as it seems to me, bad in part, it is bad in whole, and must be overruled.

Demurrer overruled.