E. Ridgelawn Cemetery Co. v. Frank

Full title: EAST RIDGELAWN CEMETERY CO. v. FRANK et al.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: Apr 8, 1910

77 N.J. Eq. 36 (Ch. Div. 1910)

77 N.J. Eq. 36

Opinion

04-08-1910

EAST RIDGELAWN CEMETERY CO. v. FRANK et al.

John R. Hardin, for demurrant. Michael Dunn, opposed.

STEVENS, V. C.

Suit by East Ridgelawn Cemetery Company against Adam Frank and others. Demurrer sustained to the bill.

John R. Hardin, for demurrant.

Michael Dunn, opposed.

STEVENS, V. C. This bill is filed for the specific enforcement of an agreement to convey land and to pay off certain mortgages.

The complainant was incorporated September 30, 1905, under the act to authorize the incorporation of rural cemetery associations. Gen. St. p. 349. After its incorporation it made an agreement (whether in writing or otherwise is not stated) with the defendant Frank and one Pond, who subsequently conveyed all his interest to Frank, that they should convey or cause to be conveyed to complainant, free and clear of all incumbrance, a tract of land in Acquackanonk township, containing 125 acres. This tract, with the exception of two parcels of land, containing, respectively, one and two acres, they did in fact cause to be conveyed, as agreed. They also agreed to convey such other land, not exceeding 10 acres, as might be necessary for the purpose of straightening jut the cemetery lands.

The bill alleges that it was also agreed that they would convey to the West Ridgelawn Cemetery Company, the complainant being known as the East Ridgelawn Cemetery Company, 135 acres, "making," so the bill states, "270 acres in all," and would (I quote from the bill) "accept and receive in payment, and as a consideration price for said conveyance, a certain interest in the proceeds of the sale of the said lands, after deducting certain charges and expenses, and which interest in said proceeds of sale was agreed to be fixed at 50 shares per acre for the land conveyed to each cemetery, which amounted to 13,500 shares as the aggregate amount." The bill then proceeds to state as follows: "And the said interest was to be evidenced by one or more certificates, signed by your orator and the said West Ridgelawn Cemetery (a body corporate), representing in the aggregate 13,500 shares, and the same were to be issued and delivered to the said Adam Frank, * * * and that in pursuance of said agreement to purchase said lands your orator and the said West Ridgelawn Cemetery did issue and deliver to the said Adam Frank the said certificates evidencing such interest in the proceeds of sales to be made by your orator and the said West Ridgelawn Cemetery of the lands so conveyed, and to be conveyed, to them under said agreement." The bill further alleges that, to better effectuate the performance of the agreement, and to indemnify complainant against the payment of the mortgages, and to secure the conveyance of the remaining lands agreed to be conveyed, Frank assigned to the Passaic Trust & Safe Deposit Company certain of said certificates, representing 2,500 equal, undivided shares in the said proceeds of sale of the lands of complainant and the said West Ridgelawn Cemetery, in trust for those objects, that he has failed to pay off three mortgages on which there are now due, $5,000, $3,750, and $5,500, respectively, and that he has failed to convey the remaining land agreed to be conveyed.

There are other allegations, but the above are the material ones. The complainant insists that it has a lien in equity on all shares issued "outside of the 2,000 shares deposited with the trust company," and asks for an injunction restraining Frank from disposing of any of the shares, and for a decree directing Frank to pay the mortgages and to convey the lands agreed to be conveyed, and for which he has already received the full amount of shares to which he was entitled, not only for the land actually conveyed, but also for that which he agreed to convey and did not convey. The prayer is, further, that on Frank's failure to pay and convey, a receiver may be appointed to take Frank's shares, and he be required "to make abatement of said consideration of 50 shares of each acre of land which he fails to convey."

The bill is notable for its omissions. It does not state within what time Frank was to pay off the mortgages or otherwise performhis agreement it does not state whether the agreement was in writing, and, of course, does not append any copy of it. It does not set forth the terms of the written trust on which the trust company holds the 2,000 shares; it does not show why that trust cannot be enforced by the trust company, and it does not allege that the trust company has ever been called upon to enforce it. It is, moreover, vague and uncertain on a subject of vital importance. It alleges that payment for the land was made by issuing certificates signed by the two companies, representing "a certain interest in the proceeds of the sale of the said land" (without telling us what interest), "after deducting certain charges and expenses," without telling us what charges and expenses. It merely says that said interest was fixed at 50 shares per acre, and amounted to 13,500 shares as the aggregate amount. No copy of this novel certificate is appended, and we can only gather its terms from the above description.

This much is clear: The certificate is the joint certificate of both companies, and purports to give to the vendor 13,500 shares in the proceeds of the sale of the land as the consideration for twice 135 acres, or 50 shares per acre; the maximum amount which a cemetery company may hold being 135 acres. Is such a scheme authorized or permitted by the cemetery act? "A cemetery for the burial of the dead," says Justice Gray in Close v. Glenwood Cemetery, 107 U. S. 474 [2 Sup. Ct. 273, 27 L. Ed. 408], "if not a strictly charitable use, is in some aspects a public and pious use." Our courts have taken a similar view (Newark v. Stockton, 44 N.J.Eq. 180, 14 Atl. 630; Toppin v. Moriarty, 59 N.J.Eq. 115, 44 Atl. 409), and so has the Legislature. The cemetery act gives the management of the cemetery to trustees elected by the lot owners. It exempts cemetery lands from taxation and assessment. Rosedale Cem. Asso. v. Linden, 73 N.J.Law, 421, 63 Atl. 904. It provides that lots, from the time of interment, shall, in general, be inalienable. It confers a limited power of eminent domain. It allows the association to hold property, real and personal, upon trust to apply the income to the improvement and embellishment of the grounds. It authorizes the investment of money accruing from the sale of lots for the purpose of maintenance and improvement (section 67), and it expressly directs as follows (section 19): "One-half at least of the proceeds of all sales of lots and plots shall be first appropriated to the payment of the purchase money of the lands acquired by the association until the whole purchase money shall be paid; and the residue thereof 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 after the payment of the purchase money and the debts contracted therefor and for surveying and laying out the ground, the proceeds of all future sales shall be applied to the improvement embellishment and preservation of such cemetery and for incidental expenses and to no other purpose or object so long as such embellishment is incomplete."

The only intimation that cemetery companies may issue stock is to be found in the supplement of March 14, 1879 (Gen. St. p. 351, § 16), referred to in the opinion of Pitney, V. C, in Ransom v. Brinkerhoff, 50 N.J.Eq. 149, 38 Atl. 919. It is there provided that every "creditor in addition to his right to vote by virtue of his owning lots, shall be entitled to one vote for every four hundred dollars worth at par value of bonds, stock or other duly authorized evidences of debt he or she may own or hold against such association." As to this. Pitney, V. C, said: "The existence of stock or shareholders is not contemplated by the act nor consistent with the legislative scheme. * * * By implication the language recognizes the right of the association to make use of the machinery of certificates of stock to manifest a debt owing by it, but clearly it left the owner a mere creditor and no more; for it is as a creditor only that he is authorized to vote for the trustees." It is quite plain that the insertion of the word "stock" in the supplement was a mere inadvertence, and that, if this provision be still in force (see Supplement March 17, 1893, Gen. St. pp. 357, 358, §§ 40, 47), the so-called stock can be nothing more than an evidence that a specific sum of money is due and owing by the corporation to the creditor. The question then is: How does the certificate issued by the two companies harmonize with the legislative scheme as thus outlined?

By the scheme under review no purchase price is fixed. The certificate holder receives either the whole or a part of the proceeds of the sale of the burial lots up to the time that the last lot is sold. He thus gets the benefit of the sums expended for improvement and embellishment, whether those sums be derived from donations or from the proceeds of the sales of lots. He makes a profit out of their exemption from taxation and levy, and even from the possible exercise of the power of eminent domain. The statute contemplates the purchase of the land for a definite price; but under the scheme in question there is no price, in the ordinary sense. The grantor either appropriates the whole of the proceeds of the sale of the lots "after deducting certain charges and expenses"; or at least a part, and if a part, we are not told how much. On the face of the bill there is nothing to indicate that the certificate is consistent with the provisions of the statute, and much to indicate that it is not. The certificate appears to be open to the following objections: First, it is the joint certificate of two companies that have no statutory power to enter into a joint undertaking that makes each liable for the moneys received by the other; second, the contract expressed in the certificate appears,as far as we can gather from its contents, to disregard entirely that provision of the law which obliges the company to appropriate one-half of the proceeds of the sale of its lots for the preservation and embellishment of the cemetery property and for incidental expenses; third, the certificate does not oblige the companies to pay a definite price for their lands, but, like the ordinary stock certificate, appears to give an indefinite interest in earnings. The certificate holder becomes virtually a partner, sharing in the gains, but not liable for the losses. It is not likely that the Legislature intended to confer immunity from taxation and levy, coupled with the power of eminent domain, in order that some individual might make an increased profit out of those extraordinary powers and immunities. At all events there is no warrant in the statute for such a certificate, and it is out of harmony with the general scheme of the act.

It is argued that the court may give relief without passing upon the question of the validity of the certificate. But the relief asked is specific performance of an agreement to convey land and to pay off mortgages; the consideration, and the sole consideration therefor, being the certificate in question. If on the face of the bill such a certificate appears to confer no legal right, I do not see how it can be successfully contended that the court can decree for complainant. It only decrees a specific performance where it finds that a valuable consideration has been given. Here the consideration is a stipulation for an interest in the proceeds of the sale of lots—a stipulation that the companies have no right to give.

I think the demurrer should be sustained in this as well as in the similar case of the East Ridgelawn Company.