Bassin v. Enoch-pearl Co., 216.

• Decision Date: 12 September 1947
• Docket Number: No. 216.,216.
• Citation: 54 A.2d 824
• Parties: BASSIN et al. v. ENOCH-PEARL CO. et al.
• Court: New Jersey Supreme Court

54 A.2d 824

BASSIN et al. v. ENOCH-PEARL CO. et al.

No. 216.

Court of Errors and Appeals of New Jersey.

Sept. 12, 1947.

Appeal from Court of Chancery.

Action by Margaret Bassin, etc, and others against Enoch-Pearl Co., and others, for an accounting of dividends declared and for other relief. From a decree striking out part of defendants' answer, defendants appeal.

Affirmed.

Sandles & Sandles, of Newark (William Furst, of Newark, of counsel), for appellants.

Koestler & Koestler, of Elizabeth (Melvin J. Koestler, of Elizabeth of counsel), for respondents.

On appeal from a decree of the Court of Chancery, in which court Vice-Chancellor Stein fild the following opinion:

‘Appeal having been taken from an order dated December 23, 1946 by which the Court struck that part of the answer of the defendants alleging that the indebtedness of Harry Siegel bore interest after his deathand directed the defendants to account to a Master appointed for the purpose of taking an account and directing the Master in the taking thereof to preclude therefrom interest on the indebtedness of Harry Siegel, and directing defendants to make discovery under oath before said Master concerning dividends declared and paid by the defendant, Enoch-Pearl Co., and to whom paid and how applied, and therefore this opinion is now prepared and filed.

‘The bill of complaint is brought by Margaret Bassin (formerly Teets) as trustee for Marilyn Siegel and June Siegel, infant daughters of the late Harry Siegel, and is joined in by Doris Franklin (formerly Siegel) as guardian and mother of said infants and by the daughters individually.

‘The defendants are the Enoch-Pearl Co., a family corporation, Robert Siegel and Frances Baum, a brother and sister of the late Harry Siegel.

‘The complainant-trustee is the holder of one-third of the capital stock of Enoch-Pearl Co., subject to the lien of the company thereon for indebtedness of the late Harry Siegel to the company and seeks generally by her bill of complaint to have an accounting of the dividends declared by the company and applied by the company against the late Harry Siegel's indebtedness, and for permission to pay any balance thereof remaining and to have her certificate of stock declared free and clear of any inscription thereon to the effect that it is subject to the lien of said indebtedness.

‘According to the bill, Henry Siegel being in 1938 the owner of all of the capital stock of the Enoch-Pearl Co., entered into an agreement (to which the company was a party) with his three children, Harry, Robert and Frances. The agreement is in substance an inter vivos family settlement by which all the capital stock of the company is divided one-third to Harry, one-third to Robert and one-third to Frances. It provides that all debts, if any, due from Robert and Frances to their father or to the company are cancelled, but Harry acknowledges a debt to the company of $5,250.00, and it is therein specifically provided that such debt shall not bear interest and that Harry Siegel shall not be called upon to pay the indebtedness, except on a sale of his stock in the corporation or on the division of the proceeds of the sale of any assets of the corporation. The agreement provides that there shall be endorsed on the certificate of stock held by Harry Siegel suitable indicia of his indebtedness. And ‘In the event of a sale of any of the assets of said party of the first part after the lifetime of said party of the second part and while said Harry Siegel is indebted to said corporation as hereinabove contained, the proceeds therefrom insofar as able to, shall be applied in reduction of said Harry Siegel's indebtedness to said party of the first part. In the event, however, of the prior death of the said Harry Siegel before liquidation of his indebtedness * * * then * * * said indebtedness shall be provable under his estate.’ The stock certificate was inscribed to indicate that it was subject to the lien of the mentioned debt.

‘Harry Siegel's shares of stock were later transferred by him to Emmett C. Choate, trustee for Marilyn Siegel and June Siegel, and thereafter were transferred to Margaret Teets (now Bassin), trustee for Marilyn Siegel and June Siegel. A new certificate of stock was issued by Enoch-Pearl Co. upon each transfer, but the stock in the hands of the trustee continued to bear the inscription that it was subject to the lien of the company for said indebtedness.

‘On January 11, 1943 Margaret Teets executed a declaration of trust setting forth the trust upon which she held the shares of stock; on December 6, 1943 she executed an amendment thereto annexed to the bill as exhibits ‘B’ and ‘C’. The trust generally is to pay the income to Harry Siegel or as directed by Harry Siegel during his lifetime, or if he be absent...