| N.J. | Mar 15, 1884
The opinion of the court was delivered by
The bill shows that the firm of James Horner & Co., composed of James Horner and James Ludlum, manufacturers of steel and files at Pompton, in this state, was dissolved in 1874, by the death of Homer; that, at his death, the firm owned real estate at Pompton, worth near $200,000, and personal property exceeding in value that amount; that the liabilities of the firm, including $115,000, then claimed by Corning to be due to him on his mortgages against the property, aggregated $180,490; that Horner, by his will, gave to Ludlum’s wife his interest in the land on which the mansion-house was being built, and after providing for the payment of debts, gave the residue to Alice Buckingham, one-fourth of which she was to hold in ti;ust for her sister, Susan Horner, and appointed Alice Buckingham executrix of his will; that she proved the will, and in 1874 filed a bill in chancery, as executrix, against James Ludlum, for an account and settlement of the partnership estate, and for a receiver; that, under these proceedings, Ludlum was appointed receiver, with power to take possession of the firm property, to sell the personal property, with leave, notwithstanding his office
None of the defendants, save Buckingham and his wife, answered, and they set up that the personal property of the firm was ample to pay the mortgages, and that it should be applied thereto. Subsequently to the decree, there was credited on the execution the sum of $24,349.18, the price of certain personal property of the late firm of James Horner & Co., bought by Ludlum for Corning, under the permission given him to bid and buy, as aforesaid. Corning purchased the mortgaged premises July 5th, 1877, for the balance due on his decree. The bill further alleges that Coming's said mortgages were usurious, and that the foreclosure decree was for $20,000 more than the sum actually due thereon; that the sale of the personal property to Corning through Ludlum, the receiver, was illegal and for a very inadequate price — at least $30,000 less than its fair value; that, before the foreclosure sale, the lease which the late firm had to flow certain land for the water-power by which the factory machinery was run, with the right to buy the same at a stated price, had expired, and that, although Ludlum, as receiver, had abundant means to purchase the said land or renew . the lease for the benefit of the trust estate, he communicated the fact of the expiration of the lease to the solicitor of Corning, in the foreclosure suits, and said solicitor thereupon, before the foreclosure sale, acting for the benefit of Ludlum and Corning, obtained a renewal of the said lease, in the name of Ludlum’s
It is further set forth in the bill that, after the sale of the personal property to Corning, the Pompton Steel and Iron Com pany was organized under a special charter, in the interest and for the benefit of Corning and Ludlum, who are the stockholders and directors therein, and have absolute control thereof; that the personal property purchased by Corning through Ludlum, as aforesaid,' was transferred to this company, and that an agreement has existed, ever since the sale, between Corning and Ludlum, that when the mortgages shall be fully satisfied, Ludlum shall resume control of the property. James Ludlum was removed from the office of receiver on the 22d of June, 1879, and Kirkpatrick, the complainant, appointed receiver in his stead. This bill is filed by Kirkpatrick, as receiver of the late firm of James Horner & Co., against Erastus Corning, James Ludlum and Susan H., his wife, Alice Buckingham, as executrix and devisee under the will of James Horner, deceased, and John M. Buckingham, her husband, Susan Horner and the Pompton Steel and Iron Company. The prayer of the bill is that the complainant may be allowed to redeem the property-sold under the foreclosure decree, on the payment of the sum actually due on the mortgages, deducting the fair value of the use and occupation of the premises since the foreclosure sale, and also crediting the full value of the personal property bought by Corning through the former receiver, and if redemption be denied on these terms, that the foreclosure sale be set aside and a new sale ordered, to raise what may be due after making such credits as the complainant shall be equitably entitled to.
To this bill, the defendants Corning, Ludlum and wife, and the Pompton Steel and Iron Company, have demurred; the material allegations of the complainant’s bill must, therefore, be taken as true.
The first ground relied upon by the complainant is that Lud
Ludlum was appointed receiver under a bill filed by Alice Buckingham, executrix of James Horner, deceased, to secure a settlement of the partnership affairs of James Horner & Co., on behalf of Horner’s devisees. No title whatever to the real estate was vested in Ludlum as receiver. The bill shows that, before the institution of the foreclosure suit, ail the debts of the firm were paid except a claim of one McElroy (the amount of which is not stated), for services, which claim is in litigation. It also appears that there was personal property of the firm to the amount of $120,000, applicable to the payment of debts, besides $37,000 worth of personalty divided been Ludlum and Mrs. Buckingham.
Ludlum was appointed receiver, on behalf of the devisees of Horner, and while he was charged with the duty of paying the - firm debts, there were abundant assets for that purpose, outside of the real estate, the legal title to which was in the individual members of the firm.
The only persons beneficially interested as defendants in the foreclosure suit were Ludlum and the devisees of Horner.
These devisees were all made parties, and Ludlum, the then receiver, was also a party, in his individual capacity. Admitting that the latter should have been a party, as receiver, he and the parties whom he represented could not stand by without objecting, and claim to be heard in equity, against the proceeding and decree.after sale of the property. The decree would obviously have been without effect, unless it was to bar the right of the receiver. The devisees and Ludlum had the entire interest, both legal and equitable, and that interest was represented by the receiver. The receiver would not have been permitted to exercise any rights in the property, against their wishes. If they had sold and conveyed the property, the purchaser would have taken the entire title, with the right to apply to the court to discharge all equitable power of the receiver over it. Their silence in the suit was equivalent to a consent that the property should be treated as their property, and it would be inequitable,
It will be necessary, therefore, to consider the other branch of the complainant’s case, which rests upon the allegations of fraud contained in the bill.
The charge is expressly made that, before the foreclosure sale, the renewal of the Schuyler lease was secured in the name of Ludlum’s wife, by Coming’s solicitor, for the benefit of Ludlum and Corning, and that Ludlum proclaimed, at the sale, that the lease would be held adversely to any purchaser. The inevitable effect of such a scheme was to deter purchasers from bidding, and Corning was thereby enabled to purchase the premises without competition. The attitude in which these defendants are thus placed is simply this: Ludlum, false to his duty as receiver, deters bidders at the sale, and Coming tempts him to a breach of trust by sharing with him the fruits of the fraud on the cestuis que trust. If the complainants can successfully establish the truth of these charges, they will be entitled not only to redeem the mortgaged premises, but also, if the bill is properly framed for that purpose, to a transfer of the Schuyler lease, on equitable terms.
This furnishes sufficient ground for retaining the bill. The other allegations of fraud need not be adverted to. The extent of the relief to which the complainants may be entitled must be determined on final hearing. The decree below should be reversed.
Decree unanimously reversed.