Shepard v. New Jersey Consolidated Water & Light Co.

| New York Court of Chancery | Dec 26, 1907

Howell, V. C.

The petitioner now applies to the court to be made a defendant in order that it may set up as a defence to Mr. Shepard’s foreclosure proceedings the allegation that he, as the holder of the receivers’ certificates, agreed with the reorganization committee that he would accept bonds of the new company under the modified plan of reorganization in lieu of the receivers’ certificates, and so defeat the present suit. The motion is resisted on the following grounds: First. Because it appears by the moving papers that, while the petitioner deposited its bonds under the plan of reorganization with the Columbia Trust Company, and agreed to accept bonds of the new company for the amount of its claim, as a matter of fact it has not so accepted the new bonds, and therefore cannot be said to be either the owner or holder of bonds of the old company, or of bonds of the new company. Second. That as a bondholder of the old company, if it is to occupy that position, it is represented by the Colonial Trust Company, under the terms of the trust mortgage, and that its only remedy is to seek relief through the rights of the Colonial Trust Company, if any it has. Third. That it does not appear that there was ever any binding agreement made by Mr. Shepard, the complainant, to accept bonds of the new company in lieu of the receivers’ certificates which he holds.

As to the first objection, I am obliged to find that the petitioner has placed itself in a somewhat equivocal position. It has deposited its bonds in pursuance of the plan of reorganization by which it agreed to take therefor bonds in the new company, but it says, in its petition (paragraph 10), that at the time it made its deposit of bonds and at the time of the sale of the property it was not aware of the fact that the holders of the receivers’ certificates would not accept the bonds of the new company, and that when it subsequently learned this fact it did not take from the Columbia Trust Company the bonds of the new company in lieu of its bonds of the old company. As to a portion of this statement the petitioner is mistaken. It is undoubtedly true that at the time of the issue of the first plan of reorganization it did not know that the holders of the receivers’ certificates would refuse to accept bonds in the new company; but it did learn it by the issue of the modified plan of January 28th, 1901, which was accepted by it under date of February 28th, 1901, a month'before the sale of the property was made; and when it says that after it learned of this fact of refusal it did not accept the bonds in the new company, I must find that this operates as a refusal to accept such bonds, and that it can now base no right of action or defence on bonds which it has refused to accept.

As to the second objection, namely, that the petitioner’s remedy is to be worked out through the Colonial Trust Company’s rights as trustee, it is sufficient to say that the Colonial Trust Company is not a party to this record, and that it would experience the same difficulty in being made a party as does the present petitioner.

As to the third objection, I find that there is not anywhere in the moving papers any statement that the certificate holders have executed any binding agreement to take the bonds of the new company in exchange for their certificates, except the extracts herein above made, from the plan of reorganization. While it very fully appears from the modified plan that the certificate holders had refused to make the exchange, that would be no defence to the present bill, unless the petitioner, or those with whom it was privy, had made an agreement which could be enforced. It would be futile for a defendant to allege an agreement which could not be proved because it never existed, and it would be quite as futile to allow a person who is not a party to the suit to come in and set up this defence unless he could show prima facie on his moving papers that such defence existed. Mutual Life Insurance Co. v. Schwab, 51 N. J. Eq. (6 Dick.) 204; Davis v. Sullivan, 33 N. J. Eq. (6 Stew.) 569.

Taking the plan and the modified plan together as one document, the only agreement on the part of the certificate holders therein stated is that they have agreed to extend the due day from December 1st, 1906, to June 1st, 1907.

But if all the foregoing questions could have been decided in favor of the petitioner there remains an obstacle to this proceeding which it cannot overcome. There is no such thing known to equity practice as the admission of a stranger as a party to a pending suit, either as complainant or defendant, unless the complainant shall consent thereto, or there be a statute within the provisions of which he may bring his application. 1 Dan. Ch. Pr. 287, noie 2. Chancellor Cooper has collected the cases on the subject in Stretch v. Stretch, 12 Tenn. Ch. 140 (1874), and it was declared to be the rule in this state, in Jones v. Winans, 20 N. J. Eq. (5 C. E. Gr.) 98 (1869). There the petitioner sought to be made a party defendant to a foreclosure suit; he had no judgment or other lien; he had only an award in an arbitration proceeding. The court held that he was not a necessary party, and that there was no authority or precedent for such an order as was asked for; that it was against the settled principles on which the practice of the court was founded; that there was no precedent for allowing anyone not a party to the suit to intervene by petition on his own motion to be made a party, except in cases like that of Melick v. Melick, 17 N. J. Eq. (2 C. E. Gr.) 156 (1864), where a cestui que trust was permitted to litigate in the name of his trustee, who was a defendant, but was in a position to have more interest or leaning in favor of the complainant than of his cestui que trust. This exception in favor of trust suits is very clearly stated in the opinion of Chancellor Cooper, above referred to. There are cases in which the application has been granted either with the consent of the complainant or where he did not object. But here the complainant objects, and unless the petitioner can exhibit a statute which permits it he cannot be admitted to the suit. The only statutes which relate to the subject are sections 29 and 58 of the Chancery Practice act. P. L. 1902 p. 510. These acts were passed in 1870, the year after Chancellor Zabriskie decided the case of Jones v. Winans, supra. P. L. 1870 p. 40. The twenty-ninth section provides for the admission to a pending suit of any person who should acquire such an interest in the subject-matter of the suit after the filing of the bill, as would have made him a proper or necessary party if such interest had been possessed by him at the time of the commencement of the suit, and prescribes a proceeding by petition. The fifty-eighth section relates to the admission to foreclosure suits of persons claiming under conveyances or liens,- the evidence of which is not recorded. This section, however, is so far from the question now under discussion that it may be disregarded. The scope of the twenty-ninth section was explained in Mutual Life Insurance Co. v. Schwab, 51 N. J. Eq. (6 Dick.) 204. There Vice-Chancellor Green says that this section does not contemplate the admission of a party as a defendant when the right which he seeks to set up is one that requires that he should by way of answer and cross-bill place himself in a position where he can be entitled to the relief asked for. Its design is to provide an easy and inexpensive method by which the person who succeeds to or acquires pendente lite an interest in the subject-matter of a suit may take the place of his predecessor under the issues existing in the suit and just in the state or condition in which those issues are when he comes in, but it is not its design to give him the right to raise new and different issues from those existing at the time he comes in. If his interest requires, and he wants to do that, he must proceed by an original bill, or an original bill in the nature of a supplemental bill. The simple remedy of application by petition under the statute is not available for that purpose. In that case the petitioner was driven to an original bill in the nature of a supplemental bill. Hare v. Headley, 52 N. J. Eq. (7 Dick.) 496. The scope of such a bill is defined in Mitf. Eq. Pl. 118.

There have been many cases since 1870 in which parties have been admitted- as defendants, but so far as I have been able to discover they are all proceedings under the statute of 1870, and I know of no other statute under which the application could be made. A few months after the passage of the act of 1870 the case of Linn v. Wheeler, 21 N. J. Eq. (6 C. E. Gr.) 281, was decided. An application similar in principle to the one now in hand was denied. In Esterbrook v. Ahern, 31 N. J. Eq. (4 Stew.) 3, the petition was dismissed and the applicant driven to filing an original bill. In Hewitt v. Montclair Railway, 25 N. J. Eq. (10 C. E. Gr.) 100, the applicant was admitted by force of the statute, but was not permitted to answer and thus raise new issues. In all the cases, only a few of which are here cited, the court has striven to maintain the integrity of the issues raised by the original pleadings and to keep the newly-admitted parties within the scope of the original suit. The views herein above expressed do not in any way militate against the inveterate rule which permits the court to refuse to proceed for manifest want of parties. If at any stage of a cause there appears to be a lack of parties the court will order it to stand over until the complainant shall have had an opportunity to bring them in, and if he does not comply with the suggestion of the court he stands under the liability of a dismissal. Van Keuren v. McLaughlin, 21 N. J. Eq. (6 C. E. Gr.) 163; reversed on another point, 21 N. J. Eq. (6 C. E. Gr.) 379. This practice, however, has no-relation to a motion by a total stranger to the record for leave to-come in with a demand that may require a hearing on issues outside of those made between the original parties. In the case of Iauch v. de Socarras, 56 N. J. Eq. (11 Dick.) 525 (1898), Vice-Chancellor Pitney declined to permit a judgment creditor who had not been made a party to the suit to be admitted as a party to a creditor's bill, on the complainant’s consent, and against the defendant’s objection. The case contains a collection of all the authorities. The result is that the application must be denied.