Atlas Fence Co. v. W. Ridgelawn Cemetery

• Citation: 160 A. 688
• Decision Date: 16 May 1932
• Docket Number: No. 32.,32.
• Parties: ATLAS FENCE CO. v. WEST RIDGELAWN CEMETERY et al.
• Court: United States State Supreme Court (New Jersey)

160 A. 688

ATLAS FENCE CO.

v. WEST RIDGELAWN CEMETERY et al.

No. 32.

Court of Errors and Appeals of New Jersey.

May 16, 1932.

Syllabus by the Court.+++

1. The defendant West Ridgelawn Cemetery corporation is a charitable trust.

2. As such charitable trust, it is under the peculiar control of the Court of Chancery, which has the special jurisdiction of supervising and administering trusts.

3. When a trustee is found to be violating his trust, the Court of Chancery may in its discretion, and under its general equity powers, appoint a receiver to administer the trust.

4. The present case shows a clear and flagrant violation of the trust obligations resting on the cemetery corporation and its agents.

5. The statutes providing for sequestration receivers of property of cemetery corporations at the instance of judgment creditors are ineffective as limiting the constitutional powers of the Court of Chancery to supervise the administration of trusts.

6. The Attorney General is a necessary party to a suit in chancery looking to the administration of the affairs of a charitable use through the medium of a receiver.

Appeal from Court of Chancery.

Suit by the Atlas Fence Company against the West Ridgelawn Cemetery, an incorporated association, and others. From orders advised by the Vice Chancellor in the matter of the appointment of a receiver for the defendant corporation, the defendants appeal.

Orders in so far as appointing a general receiver reversed without prejudice.

The facts are adequately stated in the conclusions of the Vice Chancellor, which follow:

Complainant is a judgment creditor of the West Ridgelawn Cemetery, an association incorporated under the Rural Cemeteries Act, Rev. 1877, p. 100, 1 Comp. St. 1910, p. 372. It brings suit, not only for itself, but for all other creditors who may join it. The prayer of the bill is that the association may be adjudged insolvent and enjoined from exercising any of its privileges or franchises, that the rights of the complainant and other creditors be ascertained and enforced, that the assets of the defendant be marshaled and administered by the court, and that a receiver be appointed. When the bill was filed, the defendants were ordered to show cause why a receiver should not be appointed, and, upon the return of that order, argument was had and a receiver appointed pendente lite. The association now moves (by leave of the court) to vacate or modify the order appointing the receiver on grounds which are considered below.

The affidavits submitted present the following situation: The association was incorporated in 1905, and some time thereafter acquired a large tract of land in Passaic county for burial purposes. It has sold a number of cemetery plots and retains a large part of its cemetery still unsold. This cemetery land, which it still owns, is estimated to be worth about $1,000,000. Between April, 1927, and October, 1930, nine judgments were entered against the association, all still open of record and none apparently paid. The amounts are generally small—$215.90, $505.55, $201.65, $25, $186.10, $235, $350, $359.05, $4,000. A decree for $39,706.29 has been made in a foreclosure suit.

Upon the judgment for $505.55, execution issued, and on July 15, 1929, the sheriff sold thereunder part of the association's lands for $150. The association brought suit in this court to set aside the sheriff's sale, alleging that the lands sold were worth $24,000. West Ridgelawn Cem. v. Jacobs, 105 N. J. Eq. 579, 148 A. 771. The bill was dismissed and an appeal taken by the association, which is now pending before the Court of Errors and Appeals. On June 3, 1930, an order was entered in this court pursuant to a supplement to the Cemetery Act, P. L. 1881, p. 158, 1 Comp. St. 1910, p. 377, appointing Sidney Alexander receiver to sequester the rents, issues, and profits of the association in order to satisfy the judgment for $235. The foreclosure decree which was entered on July 3, 1930, appointed the Passaic National Bank & Trust Company receiver to sequester the income for the purpose of satisfying the decree. On October 27, 1930, Dougal Herr was appointed sequestration receiver for the purpose of paying the judgment of $4,000. By the terms of the decree appointing him, the association was restrained from collecting or receiving rents and from selling any lands or paying out any moneys without the leave of this Court. The foreclosure decree, as well as the decree appointing Mr. Herr receiver, are now pending on appeal in the Court of Errors and Appeals.

The bill of complaint seems to have been framed for the purpose of obtaining the appointment of a receiver pursuant to section 65 of an act concerning corporations. P. L. 1896, p. 277, 2 Comp. St. 1910, p. 1640 (Comp. St. Supp. § 47—65). The provisions of that act relating to the appointment of receivers and the winding up of corporations do not apply to associations formed under the Rural Cemeteries Act and do not support the present suit. Bliss v. Linden Cemetery, 81 N. J. Eq. 394, 87 A. 224. If, however, the bill of complaint presents a case within the general equity jurisdiction of the court, the suit may be maintained; if the circumstances require the services of a receiver pending the litigation, the motion to discharge the receiver must be denied. Counsel for the association relies primarily on sections 8 and 9 of the Cemetery Act (1 Comp. St. 1910, p. 875) and on the supplement of 1881 above mentioned. He says that these sections contain a complete plan for protecting the cemetery and at the same time affording judgment creditors ample means of obtaining payment, and that they can have no other relief in this court than sequestration pursuant to the supplement. Section 9 applies only to cemeteries of religious societies and not to the cemetery of the defendant association. This section was originally enacted in 1848, P. L. 1848, pp. 8, 9.

Section 8 provides "that the cemetery lands and property * * * shall not be liable to be sold on execution, or be applied in payment of debts due from any individual proprietors; but the proprietors of lots or plots in such cemeteries, their heirs or devisees, may hold the same exempt therefrom, so long as the same shall remain dedicated to the purpose of a cemetery." The effect of this section would be doubtful in my opinion, but it has been construed to protect the cemetery lands from sale oh execution against the association. Spear v. Locust Wood Cemetery Co., 72 N. J. Eq. 821, 66 A. 1068. It does not prohibit execution sales of chattels. Rosedale Cem. Ass'n v. Linden, 73 N. J. Law, 421, 63 A. 904.

Section 8 is substantially the same as section 10 of the Rural Cemeteries Act of 1851, P. L. 1851, p. 254. Thirty years later, the supplement of 1881 was passed empowering the Court of Chancery to sequester the rents, issues, profits, incomes, and revenues of cemetery lands in order to satisfy judgment debts. This supplement was not intended to restrict the jurisdiction of the Court of Chancery (assuming that the Legislature had power to do so), but to provide an additional remedy. Whatever equitable remedies were available to creditors, and whatever authority this court had from 1851 to 1881 to protect and relieve creditors of cemetery associations, still remain unimpaired.

This court has long enforced legal rights, when the processes of the courts of law have been insufficient to afford adequate relief. Without statutory authority, chancery aids a creditor to obtain satisfaction of his judgment when some legal obstacle interposes to prevent seizure on legal process of the debtor's property. Hardenburgh v. Blair, 30 N. J. Eq. 645. The issuance of execution is not a prerequisite if the property which complainant seeks to reach is realty. Vanderveer v. Stryker, 8 N. J. Eq. 175. A legal obstacle which is present in the instant case is section 8 of the Cemetery Act, exempting the cemetery lands from sale on execution. This exemption does not include all the lands of a cemetery association, but only those brought actually into use as a cemetery. Spear v. Locust Wood Cemetery Co., supra. The courts of law provide no means of determining what lands may be sold on execution. If the creditor makes the decision himself and the sheriff sells pursuant to his direction, there will be no bidders at the sale, for who can know whether or not the title will be good? Only in this court may the creditor have relief.

The number of Judgment creditors, the presence of three sequestration receivers, each with equal and conflicting powers, are added grounds for this court to assume jurisdiction and in one suit to determine their priorities and their rights in the premises.

The bill of complaint further alleges that the defendant Adam Frank is a trustee of the association; that he dominates the other trustees; and that he is diverting, to his own uses, funds of the association which ought to be applied to the payment of its debts. The complainant has a standing in this court to prevent such fraudulent conduct, if he can prove it. This allegation, while it helps to support the bill, is not proved by the affidavits, and has not been considered by me on the present motion.

In my opinion, the bill discloses a cause of action. I turn to the question whether the appointment of a receiver pendente lite was justified. Independent of statute, this court has frequently appointed receivers of corporation with very broad powers, where such action has been necessary to preserve the corporate property against the fraudulent acts of the directors or of a majority of the stockholders, or where there was no properly constituted governing body or internal dissension made impossible the successful conduct of the enterprise. Most of the cases are reviewed in Morse v. Metropolitan S. S. Co., 87 N. J. Eq. 217, 100 A. 219; Id., 88 N. J. Eq. 325, 102 A. 524; In re New Jersey Refrigerating Co., 95 N. J. Eq. 215, 122...