102 N.J. Eq. 100 | N.J. Ct. of Ch. | 1928
The bill is to foreclose a mortgage on a cemetery. The Union Cemetery Association was incorporated November 5th, 1909, under the Rural Cemetery act, by Samuel E. Renner and six others, the seven being the first trustees. Renner was the promoter — the others had no material interest. Renner purchased a farm of one hundred and twenty acres in Union township, Union county, on the outskirts of Newark, bisected by Stuyvesant avenue, for $50,000, and procured a franchise to operate a cemetery on it. Thereupon Renner submitted a proposition to the trustees, he having first formally resigned from the board, to sell to the Cemetery Association the land, and to (a) cause the property to be surveyed and laid out in lots and plots for cemetery purposes; (b) hedge or fence the tract on either side of Stuyvesant avenue; (c) improve the tract on the east side of Stuyvesant avenue (forty-five acres) ready for sale and interment at a cost not to exceed $50,000; (d) construct a single-track trolley line on Stuyvesant avenue from the cemetery to connect with the Springfield avenue line of the Public Service Corporation, trap rock the roadbed, obtain the franchise therefor and a contract with the Public Service Corporation to operate it; (e) widen Stuyvesant avenue, and macadam it to the width of fifteen feet from Meeker Inn to the county line; (f) pay the legal expenses ofLong v. Union,
The mortgage was executed to the Fidelity-Union Trust Company as trustee, and is in the usual form of such instruments, *104 providing for the equality of security for the bondholders; a three months' default clause, exercisable by holders of two-thirds of the bonds outstanding, and a provision that the expenses and compensation of the mortgagee trustee shall be a first lien. It recites that "this mortgage includes the purchase-money for said land," and it is stipulated that the Cemetery Association "shall lay out and improve the mortgaged premises so as to fit and make possible the use of the same for the purpose of burial, interment or cemetery purposes, and offer and expose for sale said lands as burial or cemetery plots," and upon the payment of one-half of the proceeds of sale of a burial plot or lot to the trustee it would release the sold portion from the operation of the mortgage, provided such half shall equal fifty cents a square foot for the plot or lot. By the bond, in which it is recited that there were seven hundred and fifty bonds of $1,000 each and five hundred each of $500, the Union Cemetery Association, for value received, promised to pay to the registered owner the sum of the denomination on May 1st, 1930, at the office of the Fidelity Trust Company, and the interest, per the coupons; the bond to be redeemable at par after five years. It is also stipulated therein that it is one of a series of bonds aggregating $1,000,000, the payment of which is secured by the mortgage, and that "these bonds are subject to the provisions of the said first mortgage;" and also that the bonds shall pass by delivery unless registered in the name of the owner.
The bill is in the common form to recover $1,000,000, the full bond issue, with interest. The Union Cemetery Association answers setting up part failure of consideration, and that the bondholders are not bona fide holders, and hold subject to the equities.
The extra statutory features of a promoter sharing profitspari passu with a cemetery association, dealt with inRidgelawn Cemetery v. Frank,
The contention that bonds to the extent of $625,000, given to Renner, are beyond attack, because, to that extent the cemetery association adjusted its differences with him, may be dismissed with the comment that the vote of Renner's dummy trustees to hand over to him in advance three-quarters of a million dollars of bonds was vicious, and that the vote of the later board of trustees, said to be independent, to give *106 him $125,000 of the bonds in settlement of his claim, when he, in fact, was in default, simply compounded the mischief to enable themselves, or those whom they served, to acquire the remaining bonds and was no less iniquitous. The cemetery association cannot be bound by any such self-serving prodigality.
The complainant as trustee for the bondholders claims, however, that they are not bound by the equities; that the bonds are negotiable, and that they are bona fide holders for value without notice. It relies on Dennis v. Glenwood Cemetery,