Opinion
09-12-1888
BATES v. ELMER GLASS MANUF'G CO.
J. S. Mitchell, for petitioners. M. P. Grey, for receiver.
Petition for relief.
J. S. Mitchell, for petitioners. M. P. Grey, for receiver.
BIRD, V. C. Andrew Schnitzler and others took a bond from P. T. Swearer for $6,000, to secure which the latter gave a mortgage on his real estate. This real estate he afterwards sold to the Elmer Glass Manufacturing Company. This company afterwards gave a bond to secure the sum of $5,000, to secure the payment of which it gave a mortgage upon the same premises. These instruments were executed to secure the obligees against loss by indorsing for the company. On the 26th day of March last a judgment was obtained against the company. On the next day one or more of the bondholders called upon one or more of the directors, and was informed that the company could not pay. At the same time an arrangement was made to hold a meeting of the directors and the bondholders. Before any further steps were taken a levy was made by the sheriff upon all the assets of the company. April 28th an entry was made in the minutes of the corporation in these words: "Com. called to order by Pres. Brown. On motion, the company deed the works to bondholders to the amount of $11,000.00, provided they buy glass of us, and pay the taxes. On motion, the glass be sold to the bondholders, and the money be handed to a committee, who will strike a percentage and divide the money among the labor. Com.: T. V. Brown, Edmunds, and Clevinger. Adjourned." April 30th a deed was executed by the company to all of the bondholders except two. Why their names were omitted from the deed of conveyance does not appear. It is not shown that they had ceased to have any interest. The deed was proven at the same time, and delivered to the solicitor of the grantees to be recorded; but he did not offer it for record, thinking it prudent, under the circumstances, to withhold it. On the 30th day of April, 1888, the said company executed and delivered a bill of sale of all its personal assets to the same persons to whom they executed and delivered the deed for the real estate. This bill of sale was not acknowledged, and of course not recorded. The company claims that they took immediate possession. May 5th a bill was filed by a creditor and stockholder, alleging the insolvency of the company, and asking for the appointment of a receiver. A receiver was appointed. He immediately entered upon the premises, and took possession of both the real and personal estate of the company, without resistance or objection on the part of any one, and has had possession and control of the same ever since. The grantees and vendees of the said company now come in by their petition, setting forth the said conveyance by deed and the said transfer by bill of sale, and ask the court to direct the receiver to surrender and deliver up to them both the said real estate and personal property.
That the court has jurisdiction of the subject-matter as it is presented, I have no doubt. The only question is, have the petitioners a perfect title to the real and personal property which they claim? No question of intentional fraud is raised; nor is it contended that under our laws, since the revision of the act respecting corporations, a corporation cannot prefer creditors. This has been clearly demonstrated and settled by the court of errors and appeals, in Wilkinson v. Bauerle, 41 N. J. Eq. 635, 7 Atl. Rep. 514, and Bergen v. Fishing Co., 42 N. J. Eq. 397, 8 Atl. Rep. 523. In the case before me I am only to determine whether the agreement of the parties was so effectually carried out as to pass the title. In other words, was everything done by them that was required by the undisputed terms of the agreement? What was the agreement? It was all contained in the brief minute on the book of the corporation, as quoted above. According to it the corporation was to make a conveyance of their works (the real estate) to the bondholders; that is, to their creditors who held the bonds, which were secured by the mortgages above mentioned. A deed was made, but it was not made to all the said bondholders. Two of them were not named among the grantees named in the deed.Why they were omitted does not appear. The difficulty in consequence of such omission is not that they may not have an equal interest in the land with the other grantees, for that might be so deciared if they chose to insist upon it; but the difficulty is in the unquestioned fact that if they should not claim that the said grantees held the land in trust for them as well as for themselves, that they would have an undoubtedly valid and subsisting claim against the said corporation. Now, there is no pretense that any such consequence was ever intended, and yet it cannot be prevented if the bondholders who were not named in the deed see fit to insist upon their rights, since they cannot be compelled to change their security without their consent. It is true that it may be said that this is of small importance to them, since, by the deed, they have no greater security than by the mortgages. But it is also true, and very important, that the mortgagees not included among the grantees named in the deed had personal security by virtue of their bonds, if not a just claim also thereby upon the assets of the said corporation. But whether either of these considerations have any weight or not, it is perfectly plain that the terms of the agreement have not been complied with, in that all of the bondholders were not included as grantees in the deed. It will be seen that the agreement, as expressed in the resolution, provides that the said bondholders should buy the glass and should pay the taxes. This, of course, referred to the manufactured glass then on hand, and to the taxes which had been assessed and were then liens against the assets of the corporation. Neither of these important, and, as it will be seen, very essential, considerations were complied with by the grantees named in the deed. That this was very essential will appear when it is considered that the object of such provision was to have the money received for such glass which was to be paid to a committee of the company, and by it paid to the laborers. Manifestly the object of the company was to get rid of all its legal liabilities to the bondholders, and doubtless expected to do so by conveying to them all the real estate which was included in their mortgages. This seemed to be fair and equitable, since it is conceded that the real estate is not worth more than the amount of the incumbrances, if to this be added the further liability of the company to three or more of said grantees, for which they had no other security than the corporation, and which claims, as I understand the testimony before me, were to be paid upon the execution and delivery of said deed. These considerations come to the court with some force, and would be strong inducements to comply with the prayer of the petitioners, were it not that the three important elements in the agreement above mentioned have been so entirely overlooked in the attempt to execute it. The petitioners do not come in, and in addition to their prayer for the delivery of the possession of the property offer to carry out the agreement by paying the taxes and paying to the receiver the value of the said glass. But they insist upon it that the agreement has been fully executed. To show that they are mistaken in this, it is only necessary to read the foregoing resolution. If it be said upon their part that there was no price agreed upon for the glass, and that therefore the contract in that respect was uncertain, then, of course, they cannot call upon the court to act, for courts of equity never undertake to enforce agreements by halves. If all the essential terms of an agreement cannot be performed, courts of equity never interfere. Especially would that be so in a case of this character, the rights and interests of third persons being directly involved. But it is said that the glass and all other personal assets were transferred by the bill of sale, and that the agreement has in this respect been fully executed. This ground must fail in equity, for no additional consideration was paid; nor is there any evidence that the said grantees regarded themselves as under any obligations to make any payments therefor, although it was so distinctly set forth in the resolution, the foundation of their claim, which, being in writing, admits of no dispute. These things seem to me to be so essential to the foundation of the case, andif my views respecting them be right, it is altogether useless to pursue the other points of inquiry raised in the discussion. The petition will be dismissed, with costs.