Coggswell & Boulter Co. v. Coggswell

• Decision Date: 06 May 1898
• Citation: 40 A. 213
• Parties: COGGSWELL & BOULTER CO. v. COGGSWELL.
• Court: New Jersey Court of Chancery

40 A. 213

COGGSWELL & BOULTER CO.

v. COGGSWELL.

Court of Chancery of New Jersey.

May 6, 1898.

Bill for relief by the Coggswell & Boulter Company against Charles Coggswell. Heard on bill, answer, replication, and proofs taken orally. Granted.

William B. Guild, for complainant.

John R. Hardin, for defendant.

EMERY, V. C. The defendant, Coggswell, and one Boulter carried on from the year 1886 a manufacturing business in Newark, and in June, 1892, formed a corporation for the general purpose of taking over the property of the firm, and continuing the business. The capital stock of the company was made $200,000, which was all paid up by the purchase of the property, the good will being estimated at a valuation of $125,000, and real estate at $32,000, and other items made up the total amount. Upon the organization the entire capital stock was divided equally between the parties, with the exception of two shares issued to Mr. John Dane, counsel for the firm and company, for the purpose of organization, and to qualify him as stockholder and director. By mistake, the original issue was only $75,000, but in July, 1895, this stock was retired, and an issue of $200,000 made. The company, about the time of its organization, in July, 1892, took actual possession of all the property, real and personal, which belonged to the firm at that time, and has since continued in possession of all the real estate which the firm then occupied or used for the purposes of the business. No agreement, in writing, or appearing of record on the minutes of the company, was made previous to taking possession of the property, and the only written evidence relating directly to the transfer of either personal or real property is a deed executed by both partners to the company. By this deed, dated September 17, 1892, made three months after the organization of the company, for the expressed consideration of one dollar, the partners conveyed to the company a tract of land at the northwest corner of High street and Eighth avenue, Newark, on which the factory was located; the property fronting about 57 feet on Eighth avenue, and 175 feet on High street. The Eighth avenue frontage, as owned by the firm at the time of the conveyance, extended back the same width (about 55 feet) for a distance of about 93 feet, at which point the entire lot becomes L shaped, by an extension towards the west of about 72 feet, on a line parallel with Eighth avenue, and from High street the entire depth of this extension is about 130 feet. The tract immediately south of this L or extension, and between it and Eighth avenue, had originally been partnership property; and the firm built upon it four houses, which, with the lots upon which they were erected, were taken from the firm assets, and divided between the partners, as individuals, on April 19, 1892, by deeds then mutually executed. On the division, defendant, Coggswell, received the two houses and lots next the factory; and at the time of the organization of the company, and the execution of the deed to the company now in question, the factory, as built up to the eastern line of his lots, extended from Eighth avenue 72 feet, and about 8 feet beyond the rear line of his houses, and a window in each of the three stories of the west side of the factory opened on his lots. At this point (72 feet from Eighth avenue) the entire width of the factory was about 55 feet, and covered the whole width of the lot; but from this point the factory was only about 35 feet wide, and extended along High street at this width for a distance of 15 feet. There was thus a small vacant lot, about 20 by 15 feet, adjoining part of defendant's rear lot, belonging to the firm and to the factory property. This vacant lot was at the time of the deed overlooked by windows erected in the rear and in the side of the High street extension of the factory, and was used and occupied by the firm, who had located in the center of it a tank or cemented cistern, 4 or 5 feet in diameter, and 5 feet deep, used for the purpose of blowing off steam, and connected by pipes with the boiler room of the factory. There was also a pipe leading to the roof of the factory, which projected from the factory a few inches over the reserved lot. Towards the defendant's lot, and the north, this vacant lot was at the time of the conveyance inclosed by fences. The deed to the company for its factory property did not include this small vacant lot, the legal title to which, therefore, after the deed, remained in the partners, Coggswell and Boulter, as tenants in common. All the residue of the real estate composing factory property at the time of the deed is comprised in the deed, and there is no express reservation or exception of this vacant lot, or any express reference thereto; the description of the property being merely by metes and bounds, which run around the vacant lot, and exclude it, for the reason that the description fails to include it. Nor is there anything in the description Itself which, by reference to boundaries or monuments, would clearly indicate, from the mere reading it, or without following the description on a map or survey, that the vacant lot was not included. The charge of the bill is that about June 14, 1892, Coggswell and Boulter agreed upon the organization of the company, and that the partnership business, and all the partnership property and effects, should be transferred to it for $200,000 paid-up capital stock, to be equally divided; that the company was thereupon organized, and that, Immediately upon its formation, Its directors (being the former partners and Mr. Dane) purchased all the partnership real estate and personal property, and the partners undertook to consummate the sale, and actually place the company in possession of all their property; that afterwards, by the deed of September 17, 1892, they pretended to convey to the company, in fee All the real estate, and the deed was received as such transfer by Coggswell and Boulter, as directors, officers, and trustees of the company. It further charges that the defendant, Coggswell, was intrusted with the preparation of the conveyance, and Boulter, relying on Coggswell's good faith, joined perfunctorily in the execution of the deed, supposing that it embraced all the partnership real estate; that Coggswell fraudulently, and with the intent to prevent this small lot from being built on, so that his adjoining lot might have the benefit of light, so prepared the deed as to omit the lot; that the company actually took possession of this vacant lot, and has ever since occupied it, and paid the taxes on it, and that it was only recently before filing the bill, and when it desired to extend its factory by building over the lot, that Coggswell informed the company of its lack of title to the lot, and objected to the building; that Boulter, at complainant's request, has conveyed to complainant all his right in the omitted lot, but Coggswell refuses to do so. The bill prays a decree that the tract was fraudulently excepted; that Coggswell may be decreed to hold the legal title to one-half in trust for complainant, and to convey the same to the complainant; and a prayer is added for general relief. The answer of the defendant admits the ownership of the lands in question as partnership property, the formation of the corporation, and the distribution of the stock, as alleged in the bill, and that after the formation of the company the interests of Coggswell and Boulter were the same as before, except as to third persons; Dane being joined as a corporator merely because of legal requirements. He denies that the company purchased all the manufacturing plant, embracing all the partnership real estate and personal property, for $200,000, and that the partners undertook to consummate such sale, and actually placed complainant in possession of all partnership property, but admits that all the partnership property, real and personal, was transferred to the company, "except as they reserved, as stated in the bill." And defendant claims that he and Boulter, being the absolute owners of the stock, except Dane's two shares, had a right to convey on such terms, and so much, as they chose, and to reserve such portions as they saw fit; that, in the exercise of this right, Boulter and defendant did actually reserve the lot in question. He denies that he was intrusted with the preparation of the deed, and that Boulter relied on his good faith, and joined perfunctorily in its execution, supposing that it embraced all the partnership real estate, and says that the deed was submitted to Boulter, read over by him, and the contents made known to him. He admits that the lot was excepted from the conveyance, and that the intent was to preserve the light and air to the property belonging to him individually. He further says that such reservation for light and air was necessary and essential to his lot, that he had a legal right to reserve the same, and that complainant took the deed with knowledge of the reservation.

The answer fails altogether to notice a charge in the bill which is vital in the case, viz. that before the formation of the company the partners agreed to transfer to it all the partnership property. The answer simply denies that the company did in fact purchase all the property. Nor does the answer set up a defense bearing directly upon this point which is now made upon the hearing, viz. that the reservation was made by virtue of an express oral agreement made between the partners before the preparation of the deed. In view of this evidence at the hearing, the failure to answer this direct charge of the bill, upon a matter which was within defendant's personal knowledge, may not, perhaps, under the decisions, be taken as an admission of the fact charged. Sanborn v. Adair (Err. & App., 1878) 29 N. J. Eq. 338, 345, and Jones v. Khauss (1879) 31 N. J. Eq. 609 (Van Fleet, V. C), establish that if the fact...