THE ATLANTIC REPORTER VOLUME 108 (90 N. J. Eq. 396) H. J. JAEGER CO. v. HANNAN. (No. 40-289.) LEWIS, V. C. The bill was filed by the complainant, a body corporate, against the defendant, to compel him to account for and pay over to the complainant the difference (Court of Chancery of New Jersey. Aug. 1, between what he paid for a certain piece of 1919.) land in Weehawken, N. J., and the amount 1. BROKERS 34-REAL ESTATE AGENT MUST paid to him for it by the complainant. ACCOUNT TO PRINCIPAL FOR SECRET PROFITS. Where a real estate agent was engaged by a corporation to procure for it a parcel of land on which it desired to erect a factory, and a fiduciary relation existed between the corporation and the agent, the agent cannot make any secret profit out of the transaction, and if he does so he must account therefor to his principal, the corporation. The defendant, John M. Hannan, was a real estate agent. Mr. H. J. Jaeger was the president of the H. J. Jaeger Lamp Company, the complainant. pany, the complainant. The Lamp Company desired to purchase a tract of land upon which to erect a factory. By appropriate resolutions the president was authorized to negotiate for the purchase of the tract in question. He claims that he arranged with 2. BROKERS 8(1)—BURDEN OF PROVING FI- Hannan to treat with the owner of the land DUCIARY RELATION ON PRINCIPAL. Where a corporation sued a real estate agent which it had engaged to procure for a factory site, on the ground that despite the fiduciary relation he made a secret profit, the burden of establishing the fiduciary relation is on the corporation. and obtain it for him, Hannan to receive his commission on the sale from the owner. Hannan, in turn, arranged with Louis Menscheler to negotiate with the owner, and told him to collect the brokerage for himself. Hannan then informed Jaeger that the property could not be purchased for the sum of 3. BROKERS 8(3)—EVIDENCE OF EXISTENCE $2,000, which was the price fixed by Jaeger, OF FIDUCIARY RELATION. In a suit by a corporation to recover from a real estate agent whom it had engaged to purchase for it a factory site, evidence held sufficient to establish that the agent occupied toward the corporation a fiduciary relation, so that he was not warranted in making a secret profit. 4. BROKERS 38(2)—EQUITY HAS JURISDICTION OF SUIT FOR BREACH OF TRUST BY AGENT. Equity has jurisdiction of a suit by a corporation against a real estate agent who was engaged to purchase a factory site for the corporation, and, notwithstanding the fiduciary relation, made a secret profit; the jurisdiction of equity not being affected by reason of the right of action at law on the quasi contract. Bill by the H. J. Jaeger Company against John M. Hannan. Decree for complainant. Weller & Lichtenstein, of Hoboken, for complainant. and finally the purchase price was inflated to $3,600, which is the consideration finally passing between Jaeger and Hannan. As the price advanced, however, during the negotiations, Jaeger (who had also agreed to pay Hannan the same commission which the owner was to pay) withdrew this part of the commission, and said that Hannan would have to receive his entire compensation from the owner. During all these negotiations Hannan represented to Jaeger that he was unable to get the property for the various figures mentioned, ranging from $2,000 to the final figure of $3,600. The Monor Real Estate & Trust Company was the owner of the land. It agreed to sell the land, as a result of these negotiataken in the name of Charles E. Gorrell, a tions, for $2,250. The agreement was first mere dummy. The agreement was drawn by George Frankenstein, a member of the bar of this J. Emil Walscheid, of Town of Union, for state, acting for Hannan. He testified that defendant. later on he learned that Gorrell was married, For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes and that there would be difficulty in obtain et al. (89 N. J. Eq. 602) ing his wife's signature to a deed, and so RICKEY v. MOON CLAY & KAOLIN CO. the contract with the Manor Real Estate & Trust Company for the sale of this land was assigned to Charles A. Rubens, to whom (Court of Errors and Appeals of New Jersey. Oct. 11, 1918.) 4(4)-CONSTRUCTION OF AGREEMENT FOR REIMBURSEMENT OF PROMOTER FROM PROFITS. the deed for the property was given by the Complainant, claiming to be the real party in interest, and for whom H. J. Jaeger, its Where plaintiff had obtained certain valuable contract rights, and a three-party agreebe divided equally, and the first $8,000 was to ment was entered into, whereby profits were to be used partly in paying off debts owing by plaintiff, such sum to "be regarded as expenses and first deducted out of said profits," the debts of the plaintiff should be deducted from the profits before division, and not from the share going to plaintiff, although the transaction as but profits were made out of the joint advenoriginally contemplated was not carried through, ture. president, simply acted as its agent in this transaction, now seeks an accounting from Hannan to the extent that Hannan received 2. MONEY LENT 7(1)-PRESUMPTION THAT unjust profits in this transaction. [1] It is clear that if a fiduciary relationship is shown to have existed between complainant and defendant, the defendant cannot take any profit in this transaction, at , the expense of the party whose interests he was bound to protect, unless full disclosure was made and assented to by the complainant. Loudenslager v. Woodbury Heights Land Co., 58 N. J. Eq. 556, 43 Atl. 671. [2] It seems equally clear that the burden of establishing the fiduciary relationship is upon the complainant. [3] I think there is ample evidence in this case, direct and positive, with strong corcase, direct and positive, with strong corroborating facts and atmosphere to establish the fact that Hannan, through his relations with Jaeger, was acting as the agent for the complainant, and that while so acting in negotiating the purchase of the land in question, maneuvered and manipulated a sale from the owner, to a dummy, and then resold to his principal at a profit. The exact amount of this profit is not disclosed by the proofs, but when ascertained by a proper accounting the defendant should be decreed to pay that amount to the complainant. If it is necessary to bring in Herman J. Jaeger as a party complainant in order to make the record technically correct for the granting of the relief stated, an order will be made on application to make such an amendment. [4] The only doubt in my mind is whether complainant has not an adequate remedy by law, either for damages or an action in quasi contract against Hannan to recover the amount of Hannan's profit. Dickinson v. Updike (Err. & App.) 49 Atl. 712. But I am satisfied, after consideration, that the relief here sought is of a clear equitable nature, and that a decree in accordance herewith should be made. I will so advise. by MONEY GIVEN IS IN PAYMENT OF DEBT AND one person to another is given in payment of an obligation and not as a loan. 4(1)—ON DIVISION OF PROFITS INTEREST ON LOAN TO PROMOTER Where plaintiff obtained valuable contracts and entered into a three-party agreement with defendants, wherein it was agreed that $10,000 should first be deducted from the profits, $3,000 of which was to be applied in payment of a loan to plaintiff by a third person, on division of the profits, plaintiff was not entitled to have interest on the $3,000 deducted as expenses; such interest being chargeable to plaintiff's share. Appeal from Court of Chancery. Bill by Walter H. Rickey against the Moon From Clay & Kaolin Company and others. a decree for complainant, the defendants appeal. Affirmed. The following is the opinion of Vice Chancellor Backes: In 1913 the complainant, Rickey, obtained from the defendant Moon what has been termed an option agreement, whereby Moon agreed to sell to Rickey his clay lands in Hamilton township, at any time within two years, for $6,000 per acre for the best clay lands, and $1,000 per acre for the balance. In February of the fol further term of two years, or "until the deal lowing year Moon extended the option for a now pending is closed." The deal was Rickey's negotiations with the Pennsylvania Railroad for a strip of land for its new freight line across New Jersey, between Philadelphia and New York. Rickey then interested the defendant Muschert, and persuaded him to secure a loan of $3,000 from his friend Watson upon a promise to pay Muschert one-tenth part of the profits on the option agreement. Rickey assigned the option to Watson as collateral security, and reduced to writing the 10 per cent. agreement with Muschert. He then got from (108 A.) [2] The claim made by Conard against Rickey that he loaned him $1,750 upon the understanding that it was an advance on account of Rickey's prospective profits, and to be deducted upon final settlement, is not sustained by the proofs. The money was paid by Conard to Rickey shortly after the making of the threeparty agreement, and at a time when Rickey was known to be insolvent, and when the prospects of making a profit were none too bright, and when Conard could have little hope of repayment if he were lending. The payment to Rickey is shown by two checks of Conard, one for $1,000 and the other for $750, but Conard took nothing from Rickey to show that they were loans. The presumption is that the checks were given in payment of an obligation, and Rickey says that that is why they were given. His testimony is that Conard and he agreed to divide equally the $5,000 Muschert was to advance under the three-party agreement, and I believe him as against the denial and explanation of Conard, and his story is borne out, in a measure, by the fact that the first payment. made by Muschert to Conard on the day after the three-party agreement was made was for $2,000, and on the following day Conard gave Rickey his check for $1,000. On April 30th Muschert gave to Conard another $1,500, and 20 days later Conard gave Rickey his second check for $750. There is still $750 due Rickey from Conard, one-half of the balance collected from Muschert. Moon a commission agreement, wherein Moon, and the $5,000 paid to Conard, and the other agreed to pay 10 per cent. commission upon all $2,000 which Muschert promised, are treated sales of his lands and 20 per cent. upon all by the three-party agreement as expenses of the receipts from condemnation proceedings. There- enterprise, to be paid out of the profits. In upon the complainant and Muschert and J. ascertaining what is Rickey's due the total of Lefferts Conard, the latter then an attorney at these sums ($8,000) is to be deducted and the law of this state, entered into what has been balance divided. And so with Muschert's 10 called the three-party agreement, wherein it was per cent. agreement for securing the loan from stipulated that Muschert was to hold the Moon- Watson. That is also merged in the threeRickey agreements (I do not recall whether the party agreement and controlled by the terms of commission agreement was specially mentioned) the division. for the benefit of the three, subject to the lien of the Watson loan, and that to promote "the operation" Muschert was to advance to Conard $5,000 to cover expenditures to date, and a further sum not exceeding $2,000 for future promotion. The complainant and Conard were to give their attention and efforts, Conard his professional skill, in advancing the enterprise, which was understood to be defending condemnation proceedings of the railroad company. Out of the profits Muschert was first to retain $10,000, made up of the $3,000 borrowed from Watson, the $5,000 paid to Conard, and the $2,000 to be then later advanced. The agreement then provided that all of the profits should be divided among the three, share and share alike, "after the deduction of the said sum of $10,000 hereinbefore mentioned, which said sum shall be regarded as expenses and first deducted out of said profits." The condemnation proceedings failed of realization, and then Muschert, Conard, and Moon formed the Moon Clay & Kaolin Company, and took over the clay lands for $206,000 of the capital stock of the company, under arrangement with Moon that he was to sell his holdings to Muschert and Conard for some $50,000. The clay company is now owned by Muschert and Conard, and is operating the clay pits. The complainant was not permitted to participate. He was practically frozen out. He then filed this bill to impress the trust of the three-party agreement and for an accounting. In their answer the defendants Muschert and Conard set up Rickey's 10 per cent. commission agreement, and claimed that they were operating under it in connection with the three-party agreement, and on the witness stand they both expressed themselves as willing to assume Moon's obligation to pay the commission on a sales price of $206,000, to be divided according to the terms of the threeparty agreement. Upon the court's suggestion, the complainant asked leave to amend, which was granted. [1] The vice chancellor (after argument): When the pleadings are amended as directed, this will be a bill for an accounting for profits in a joint venture. The admitted profits are 10 per cent. on $206,000, viz. $20,600, and these are to be divided equally between the complainant and Conard and Muschert, after Mr. Muschert deducts $8,000, viz. the $3,000 due to Watson, and the $5,000 he advanced to Conard. The terms of the agreement were that he was to deduct $10,000, but this included the $2,000 which he was to later advance but did not. The three-party agreement shows clearly the final arrangement of the parties, and this was that all over and above $10,000 (now $8,000) was to be divided, share and share alike. It was urged during the course of the trial and on the argument that the loan from Watson to Rickey should be taken from Rickey's share, but this manifestly was not the bargain. The $3,000 loaned to Rickey, which Muschert secured, The decree will read that Muschert pay to Watson $3,000; that the established gross profits are $20,600, from which $8,000 is to be deducted, and the balance divided into three parts. One-third will be adjudged to Rickey. Mr. Dawes: Is there any interest? [3] The Vice Chancellor: As I interpret the three-party agreement, the profit to be divided was all in excess of $10,000 net ($8,000, as it has turned out). That was the stipulation of the parties. The language is plain and explicit. If the written document does not correctly disclose the agreement of the parties, a bill to reform should have been filed. As to the interest on the Watson loan, Muschert was not to pay more of the loan than the $3,000 principal. Whatever interest has accrued is Rickey's debt, and the decree may provide that this interest be paid out of Rickey's share. Aaron V. Dawes, of Hightstown, for appellants. Linton Satterthwaite, of Trenton, for respondent. PER CURIAM. The decree appealed from will be affirmed for the reasons stated in the opinion filed in the court below by Vice Chancellor Backes. (90 N. J. Eq. 455) MASON v. HOME REAL ESTATE CO. (No. 44-687.) houses, standing when Mrs. Stevens bought (Court of Chancery of New Jersey. July 30, That it was on the title boundary line from 1919.) the apex of the triangular strip to the rear 1. ADVERSE POSSESSION 114(1)-MUST BE of the lots is admitted. The decision turns SHOWN BY PREPONDERANCE OF EVIDENCE. Possession of land is presumed in a suit to quiet title to be in the holder of the legal title, and the decree must go in favor of complainant who holds such legal title, unless the defense of adverse possession is made out clearly and positively by a preponderance of the evidence. 2. ADVERSE POSSESSION 114(2)-EVIDENCE SHOWN OF HALF OF DISPUTED STRIP. In suit to quiet title to a strip of land fronting about 4 feet on a street, and extending back about 41 feet between the houses of complainant and defendant, evidence held to show that defendant had not established adverse possession beyond a certain point, which included only one-half of the strip in dispute. Suit to quiet title between Elizabeth B. Mason and the Home Real Estate Company. Decree settling title to half the land in controversy in each of the parties. Swackhammer & Bird, of Plainfield (W. S. Angleman, of Plainfield, of counsel), for com plainant. Codington & Blatz, of Plainfield, for de fendant. BACKES, V. C. This is a bill to quiet the title to a V-shaped strip of land fronting 4 feet plus on Watchung avenue, Plainfield, and extending 41 feet plus between houses of the complainant and the defendant, called the Mason and Stevens houses. It was formerly a part of the lot of one Pound, the predecessor in title of Stevens. In 1844 he conveyed it to his next door neighbor, the predecessor in title of Mason. In 1866 he sold his house and lot and conveyed it by the description of the original boundaries, failing to except the strip, and by that description, through mesne conveyances, paper title has come to the defendant. Mary S. Stevens, the grantor of the defendant in 1882, purchased and occupied the premises, including the locus in quo, it is alleged, until 1910, when she sold to the defendant. The documentary and record title is in the complainant, Mason. The defendant claims title by adverse possession. [1] The possession is presumed to be in the holder of the legal title, and the decree must go in favor of the complainant unless the defense of adverse possession is made out, clearly and positively, by a preponderance of the evidence. Licari v. Carr, 84 N. J. Law, 345, 86 Atl. 421. The actual possession of the owners of the respective properties was delimited, up to a few years ago, by an ancient picket fence between the two upon the location of the fence in its relation to the locus in quo, and as to that the evidence is hopelessly conflicting. The complainant's witnesses place it at 18 inches to 2 feet from the Stevens house at the street line, while the defendants' witnesses say it was four feet away. The house is within an inch and a half of the V at the street line, and in the rear at a point 10 feet about the apex of the V, is within 5 inches of the title boundary line of the two properties. The effect of the complainant's proofs is to put the fence practically through the center of the "V," and that of the defendants' on the division of the lots as originally surveyed. Little reliance can be placed on the recollection of the witnesses as to where the fence stood, expressed in foot measurement. All is mere approximation. Mental measurement of space or distance between seen objects is at best nothing but guesswork, and, when based upon impression fathered by a dim recollection of the distant past, is most precarious, yielding gracefully according to fancy or conviction. There is in the case, however, certain undisputed facts and permissible inferences that lead me to believe that the complainant's approximation is more nearly correct. Whether the house was built before or after the strip was sold does not appear, but the map before me shows the façade parallel with the avenue, to be at right angles with the side which substantially parallels the near line of the V, and it would seem therefore that the house was built before. The fence was far enough away from the Stevens house to permit of a person standing comfortably in the space between, at least in the front part; but the space was not so great as 4 feet, and this I conclude partly from Mrs. Stevens' own basis of estimation. She testified that the last visible monument of the fence was a post that stood in the street line, which fell away through rot some years ago, and which, she says, had on it at the top a crosspiece 4 feet in length, that reached from it to the house to which it was nailed. Now, if allowance be made for the overlap, on the post and on the house, it cuts down the distance by just so much, whatever it may have been, and to that extent discredits the defendants' claim to the entire strip. Then, too, as is conceded on all hands, the space between the Mason house and the fence was used by the former owners of the complainant's property as a driveway for coal and ash wagons, and the distance between the house and the triangular strip was only 6 feet 6 inches, hardly (108 A.) the defendant Palmer was the actual owner of all the stock of the Development Realty Company, which made the mortgage, destroys the defense set up by the answer of the Development Realty Company, namely, that Palmer was without power to make an assignment which increases the obligations of the company under the mortgage." The elimination of this contention leaves for determination the question whether there was any consideration for the assignment of the mortgage by Palmer to complainant. sufficiently wide for wagons of the average, on the brief submitted by counsel for the dewidth, 6 feet over all. The only possible fendants, it was conceded that "the fact that motive for buying the strip by the complainant's predecessor, it seems to me, would have been the widening of the driveway. The evidence is, as I have said, that the The evidence is, as I have said, that the fence ran along the title lines of the two properties, from the extreme rear to the point of the strip, and it may be that originally it extended in a continued straight line to the street, but that it did, and so continued during Mrs. Stevens' 28 years of occupancy, is not established by the defendant. Why the purchaser of the strip should have fenced in only a part of it, if he did, or why he should have fenced it in at all, is beyond ascertainment at this time, 60 years afterward. I would not venture an opinion as to where the fence was. I am not called upon to do that. [2] The decree which I shall advise may be safely rested on these grounds: Mrs. Mason, the complainant, concedes that the fence was from 18 inches to 2 feet from the Stevens house. I shall accept the greater distance, plus 11⁄2 inches. Beyond that the defendant has not established adverse possession by a preponderance of the evidence; and I assume, upon the hypothesis that the fence was built at that point, that it was erected in a direct line to the apex; that Mrs. Stevens entered into possession in 1882, in good faith, believing that her lawful title extended to the point of the fence; and that such possession was actual and exclusive, adverse and hostile, visible and notorious, continued and uninterrupted, for more than 20 years. Foulke v. Bond, 41 N. J. Law, 527. The decree will settle the title to one half of the strip in the defendant, the other half in the complainant. No costs. (89 N. J. Eq. 220) KROUSE v. PALMER et al. The established facts relating to this inquiry holds the mortgage as trustee, are or were diare that complainant and others, for whom he rectors of the First National Bank of Roselle, and that John M. Walsh was the cashier of the bank. Some time in March, 1913, Walsh, as cashier, without the authority or knowledge of the bank directors, invested $8,000 of the bank's funds in the purchase of participating certificates in the notes of the St. James Company, Incorporated. The principal and interest of in certain installments from rentals received these notes were secured by and were to be paid from the St. James Building, owned by the company in New York City. When the bank directors and the executive committee learned of this investment which Walsh had made, they refused to ratify it, censured him for making it, and demanded that he reimburse the bank for the amount of the investment, or furnish satisfactory security for the same. Walsh, at the time, was unable to do what the directors demanded. While negotiations looking to a settlement with him were pending, the company paid in installments $3,200 on the notes and defaulted on the remainder. The matter finally came to the attention of the bank examiner and the Comptroller of the Currency, and as a result of their criticism that the investment was illegal the directors personally paid the balance due the bank, and did so at the request and on the promise of Walsh that he would secure them and the bank against loss. This he attempted to do by giving his personal note, secured by bonds of the Napa Company of California. The directors refused to accept these bonds as collateral, and thereupon Walsh and his friends induced the defendant Palmer to assign the mortgage (Court of Errors and Appeals of New Jersey. in question to complainant, as trustee for the May 3, 1918.) MORTGAGES 237-CONSIDERATION FOR AS SIGNMENT SUFFICIENT. An assignment of a mortgage as security for a debt owing by a third person, made for the purpose of keeping such third party out of trou ble, was supported by a valuable consideration. Appeal from Court of Chancery. Bill by Henry Krouse, trustee, against Francis J. Palmer and others. Decree for plaintiff, and defendants appeal. Affirmed. The following is the opinion of Vice Chan cellor Foster: This bill is filed to foreclose a mortgage given by the Development Realty Company to the defendant Palmer, and assigned by him to complainant. At the conclusion of the hearing, and directors. The liability which the directors assumed at Walsh's request was originally $4,800. This was later reduced to $3,600 by a payment of $1,200, made by the company, and again reduced to the amount now claimed of $3,200 by a payment of $400 made by Walsh. Before the directors settled with the bank, and while the investment was under criticism, intimation of criminal prosecutions against Walsh, or of his of the directors, and Walsh, in order to repay discharge as cashier, were made by one or more what the directors claimed he owed the bank and to prevent his discharge, which he claimed would prevent him obtaining another position, promised in effect that, if the directors would act to relieve the bank from any possible loss arising from the investment and himself from the consequence of making the unauthorized use of the bank's money, he would repay them and furnish them with security for any such For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes |