Summary
In Attorney General v. Linden Cemetery Association, 90 N. J. Eq. 404, 107 A. 594, thereceiver did not have enough money to pay allowances to himself and counsel.
Summary of this case from Seidler v. Branford Rest., Inc.Opinion
Nos. 35/789, 799.
06-23-1919
BLISS et al. v. LINDEN CEMETERY ASS'N et al.
Abram H. Cornish, of Newark, for complainants. Vail & McLean, of Elizabeth, for defendants.
Expenses of administration of receiver of cemetery corporation are entitled to priority over vendor's lien, since such corporation is in a sense quasi public, and receiver, in operating property, is discharging corporation's duty to the public.
Proceedings by William Bliss and others against the Linden Cemetery Association and others. On motion by receiver of defendant cemetery associations for approval of his intermediate report and for allowances foroperating expenses and services and for counsel fees. Report approved, allowances granted, and conclusions drawn as to use to be made of balance in bands of receiver.
See, also,85 N. J. Eq. 501, 96 Atl. 1001; 90 N. J. Eq. ——, 107 Atl. 53.
Abram H. Cornish, of Newark, for complainants.
Vail & McLean, of Elizabeth, for defendants.
BACKES, V. C. These cemeteries Linden and Rosedale, have been administered by the receiver as a single trust. The receiver moves that his intermediate report be approved, and that allowances be made to him for his operating expenses and services and for counsel fees to his counsel. There is no opposition, and his report is approved, and the allowances asked for are granted. The receiver has not enough money to pay them, and he will be permitted to borrow on his certificates to supply the deficiency.
The receiver has a balance on hand of, approximately, $2,500, and the controversy is over the use of this money toward defraying the administration expenses. $1,500 of this represents 10 per cent. of the appraisal of lands of the two cemeteries condemned by the Pennsylvania Railroad Company and paid into court, and recently paid to the receiver. For the purpose of this decision it may be said that the remaining $1,000 represents 10 per cent. of the proceeds of burial plots sold by the receiver. The representatives of Smith, the vendor of the lands to the cemeteries, claim that the receiver holds this balance in trust for them, that it is not available for the payment of the costs of administration, and they pray that it be awarded to them. They contend that 10 per cent. of sales made by the receiver, or by the corporations if restored to control, is impressed with a trust in the nature of a vendor's lien, and that it was so declared by the Court of Appeals in its opinion reported in 85 N. J. Eq. p. 501, 96 Atl. 1001. The appeals there under consideration were from decrees of this court striking out the second covenant in the deeds from Smith to the associations. By this covenant the associations promised
"to pay semiannually in cash to said William F. Smith, his heirs, administrators, executors and assigns, one-tenth part of the gross proceeds of the sale, lease or loan of each burial plot or of any use thereof or interest therein made by said Linden Cemetery Association, party of the second part, from the land hereinafter conveyed to said association by this indenture."
The covenant was part consideration for the conveyances, and was held to be void by this court because it violated the cemetery act. The Court of Appeals concurred, but formulated an equitable substitute which it defined in its remittitur requiring this court
"to ascertain what will be a reasonable sum to be paid to the grantor, or his assigns, for services and profit on the purchase and sale of said property, and their value to the grantee, less any credits to which the grantee is entitled. And that when such sum is ascertained it shall be treated as unpaid purchase price of the land until extinguished by payment in gross or by percentage from the price of lots, as provided in the said covenant, which covenant is declared to be extrastatutory solely because the amount to be paid to grantor was unliquidated."
In compliance, it has been determined that $51,914.07 is a reasonable sum to be paid by Linden and $28,419.20 by Rosedale (90 N. J. Eq. p. ——) 107 Atl. 53.
Claimants' counsel argues along the line that if these sums are "to be treated as unpaid purchase price of the land," as the appellate court decreed, vendors' liens are implied, and that, as the holders of such liens upon the land, the claimants have priority upon the proceeds of sales over the charges for administering the trust. I think he entertains too broad a view of his clients' rights. It seems to me that the vendor could have had no lien had this covenant been valid, and it is obvious that the Court of Appeals in recasting it conferred no greater privileges than the vendor would have had had the covenant been statutorily lawful. Considering the rights of the vendor upon the hypothesis of a valid covenant, what were they? It is not questioned that in the ordinary ease of sales of land where the purchase money is unpaid the vendor has a lien. "It is well established in this court that where land is conveyed and the purchase-money for it is not paid, and no distinct security for the payment of that money is taken in its stead, a constructive trust arises, and the vendee is considered as the trustee of the land for the vendor until the purchase money is paid. The vendor thus obtains an equitable lien upon the land for the purchase money, which is good against the vendee and his heirs and all persons taking from them as volunteers, and also against purchasers from them for value with notice that the purchase money is unpaid, and is unenforceable only against purchasers for value in good faith without such notice." Action v. Waddington, 46 N. J. Eq. p. 16, 18 Atl. 356.
But here the vendor, by conveying the lands to cemetery associations, dedicated them to public use for the burial of the dead, and at least as to so much of the lands as is devoted to that purpose a lien could not attach. The trust in the vendees to the use of a public charity is repugnant to a use to the vendor. The very essence of a vendor's lien is that it follows the lands and is to be made out of the lands, and if the remedy is not available it is because the right does not exist. In Spear v. Locust Wood Cemetery, 72 N. J. Eq. p. 821, 66 Atl. 1068, the vendor took a purchase-money mortgage, and upondefault sought to foreclose it. His contractual and legal position was much stronger than that of the claimants, but Vice Chancellor Learning held that the mortgage debt could not be recovered by a sale of the lands devoted to burial purposes, because they were exempt from execution by section 8 of the statute concerning cemeteries. (C. S. p. 375). This disposes only of the claim to so much of the funds in the receiver's hands as was derived from the sales of burial plots.
The $1,500 received from the Pennsylvania Railroad Company, in the condemnation proceedings of lands not appropriated to cemetery uses, stands on another footing. In the case last cited it was held that lands not allotted to cemetery purposes were not immune to levy and sale for the payments of the mortgage debt. Consequently such lands are the subject of vendors' liens. But Smith, the vendor, waived his right to a lien by agreeing to accept the purchase money in the manner and from the source provided by the covenant above quoted. Payment was to be made out of the proceeds of the sales of burial plots only, and by restricting himself to this single medium of payment he thereby indicated his intention to waive his right to the security of a vendor's lien upon lands not devoted to that purpose. The principles of waiver, and the adjudicated cases in this state upon the subject, are discussed at length in the opinion of Vice Chancellor Howell in Knickerbocker Trust Co. v. Carteret Steel Co., 79 N. J. Eq. p. 501, 82 Atl. 146.
The status of the vendor was that of a common creditor of the cemetery association, with the right to a semiannual accounting; and it may be that upon habitual default equity would relieve by a specific performance of the covenant, compelling the association to set aside 10 per cent. of the proceeds of the sale of each burial plot. The Court of Appeals, in fashioning the covenant so as to carry out, as nearly as possible, the intentions of the parties, left the vendor's contractual status undisturbed, and to this effect is its mandate that the consideration when liquidated "be treated as unpaid purchase price for the land until extinguished by payment in gross or by percentage from the price of lots as provided in the said covenant."
But it is not essential to a decision to determine with exactness the privileges, if any, of the claimants as against the cemetery association. The immediate question is whether they have priority over the costs and expenses of a managing receiver administering a public charity, and this I feel is not open to serious discussion or consideration.
The rule is thoroughly settled that when a court of equity takes possession of property for the purpose of protecting and preserving it for the benefit of the parties interested, the costs of administration are entitled to priority of payment, regardless of the nature of the liens and claims thereon of the litigants. This is so fundamental to the administration of justice and so generally recognized, that citation of authority is unnecessary. The rule is especially applicable in this case. But for the management of these enterprises by the receiver the covenant of the claimants would be valueless. And it is net to be overlooked that the preferential right set up by them did not arise from any fixed lien upon the property at the time it came to the hands of the receiver, which will be displaced. Whatever rights they have were born of this litigation. Then too, beside conserving the rights of creditors, including the claimants, the operation of these cemeteries was indispensable to the maintenance of a sacred trust assumed by the corporations, and was also necessary for the protection of the public, for the public has an interest in them.
Cemetery corporations are in a sense quasi public service corporations. They have been so recognized. Of them Wymans, in his work on Public Service Corporations, § 69, says:
"The absolute necessity of public cemeteries is obvious. This necessity may be met either by cemeteries owned directly by the government or by chartered corporations. Such corporations are rarely empowered to take private profit from the conduct of the cemetery, but are obliged to devote their receipts to the purposes of the cemetery. Such being the case, the law concerning them is mostly that relating to public charities, which is outside the scope of this treatise. It may be noted, however, that it is common to exempt such cemeteries from taxation, and these exemptions are liberally construed in favor of the cemetery."
In addition to exemption from taxation cemetery corporations of this state in a limited way enjoy the power of eminent domain and the right to accept trust in perpetuity. In Evergreen Cemetery v. Henry Beecher, 53 Conn. 551, 5 Atl. 353, Judge Pardee said:
"The safety of the living requires the burial of the dead in proper time and place. * * * In order to secure for burial places during a period extending indefinitely into the future that degree of care universally demanded, the Legislature permits the associations to exist with power to discharge in behalf and for the benefit of the public the duty of providing, maintaining, and protecting them. The use of land by them for this purpose does not cease to be a public use because they require varying sums for rights to bury in different localities; not even if the cost of the rights is a practical exclusion of some. * * * It remains a public use as long as all persons have the same measure of right for the same measure of money."
To the same general effect is Davis v. Coventry, 65 Kan. 557, 70 Pac. 583; Wolford v.
Crystal Lake, 54 Minn. 440, 56 N. W. 56; Close v. Greenwood, 107 U. S. 467, 2 Sup. Ct. 267, 27 L. Ed. 408.
Now, then, even if the claimant's so-called Hen had been a fixed charge upon the property (if that were possible in cemetery promotions) when the receiver took hold, I would have been justified in subordinating it to the receiver's expenses in analogy with the rule in cases of insolvency of public service corporations, proper, where the receiver operates primarily to discharge the corporation's duty to the public and for the doing of which the corporate property and the lienholder's rights may be appropriated. Wallace v. Loomis, 97 U. S. 146, 24 L. Ed. 895. The principles underlying the rule are adverted to in Liockport Felt Co. v. United Box Board & Paper Co., 74 N. J. Eq. on page 690, 70 Atl. 980. The case, however, does not require that I go to this length. It is sufficient, as already pointed out, that the claimants are parties litigants, and that the possession and operation of the property by the receiver is, amongst otner things, for the benefit of the claimants.
The receiver will be permitted to use the fund to defray his allowances.