Ivens v. Empire Floor & Wall Tile Co.

• Decision Date: 09 January 1936
• Citation: 182 A. 255
• Parties: IVENS et al. v. EMPIRE FLOOR & WALL TILE CO. In re PASSAIC NAT. BANK & TRUST CO. et al.
• Court: New Jersey Court of Chancery

182 A. 255

IVENS et al.

v. EMPIRE FLOOR & WALL TILE CO.In re PASSAIC NAT. BANK & TRUST CO. et al.

Court of Chancery of New Jersey.

Jan. 9, 1936.

Syllabus by the Court.

1. Unlawful interference with the subject-matter of litigation is contempt of court.

2. Criminal contempt must be established beyond a reasonable doubt.

3. On the evidence, held, respondents not guilty of criminal contempt.

4. On the evidence, held, receiver is not chargeable with waste.

Suit by William H. Ivens and another, trading under the firm name and style of William H. Ivens' Sons Company, against the Empire Floor & Wall Tile Company. In the matter of the Passaic National Bank & Trust Company and others charged with contempt of court.

Decision in accordance with opinion.

Hannoch & Lasser, of Newark (Aaron Lasser, of Newark, of counsel), for receiver.

Lum, Tamblyn & Colyer, of Newark (Ralph E. Lum, of Newark, of counsel), for Passaic Nat. Bank & Trust Co., Walter H. Gardner, George W. Owens, Gerard C. Manziano, William A. Sumner, and Franklin B. Bitting.

Julius Stein, of Newark, for Leon Semer and Willard B. Hutcheson.

LEWIS, Vice Chancellor.

Three matters were before the late Vice Chancellor Backes and have been referred to me for determination: An application by the receiver of the Empire Floor & Wall Tile Company to punish for criminal contempt Passaic National Bank & Trust Company and certain of its officers and agents, together with the chief of police and corporation counsel of Metuchen, for interference with the receiver: to set aside a certain compromise agreement; and to charge the receiver with waste. These all arose in connection with a sale of personal property by the receiver at the plant which had been occupied by the Empire Tile Company.

Voluminous testimony was taken on all three matters.

In 1922 one John B. Owens, the owner, executed a mortgage on the premises in question to Passaic Trust & Safe Deposit Company, to whose rights Passaic National Bank & Trust Company succeeded. Owens leased the premises to the Empire Tile Company, which operated a tile factory. A large amount of various kinds of machinery, kilns, and other appliances for making tile were installed after the mortgage, although it does not clearly appear whether these were paid for by the corporation or by Owens personally.

The bank instituted foreclosure proceedings in April, 1931, and the following month the receiver for the tile company was appointed. The foreclosure was contested, but finally resulted in a foreclosure sale on February 15, 1933, and the premises were sold to the bank. During all this period the bank was mortgagee in possession and the receiver made no effort to remove from the premises any of the personal property which belonged to him. After the right to sell at foreclosure had been determined, and two or three months before the sale, the receiver notified the bank that the personal property on the premises belonged to him and suggested that this property be sold at the same time as the realty. The bank thereupon notified the receiver that it claimed the machinery and fixtures in the plant as subject to its mortgage. Conferences were had without agreement as to the respective rights. A correspondence then ensued between the respective counsel for the bank and the receiver. On January 14, 1933, the receiver's counsel wrote the bank's counsel that, "if you do not care to adjust the matter I will be obliged to apply to Vice Chancellor Backes for an order restraining your sale, and a reference to a Master in order to determine what the extent of your mortgage is, and your extent of ownership to the personal property." On January 25, 1933, the bank notified the receiver that it claimed as part of the realty and would sell at the foreclosure sale certain specified items of machinery. In response on January 26th, the receiver's counsel wrote that part of the items were conceded but that certain others of them were claimed by the receiver, and that unless they could agree he was of the opinion that the matter should be submitted to the Vice Chancellor.

The foreclosure sale was held on February 15th without any application having been made to the court to have the ownership of the disputed items determined. On February 21st, an order was made in the receivership proceeding directing a public sale of the personal property of the receiver on March 16th.

It is in connection with this sale that the acts charged as criminal contempt occurred. Counsel for the bank attended at the sale, and announced that purchasers would take subject to the rights of the bank, and then left. In the conditions of sale was the provision, "Subject to the claim, if any, of the Passaic National Bank and Trust Company." The receiver through his auctioneers then proceeded to sell numerous items, including not only such articles as the bank conceded he owned, but also those in dispute. It was announced that application to confirm would be made on the 21st, and that purchasers could thereafter remove their goods. A report listing the items sold was presented to the court in the receivership proceeding, and the sale was confirmed. The bank was not a party to the receivership proceeding, although the receiver was a party to the foreclosure.

On March 22, 1933, when some of the purchasers came to take their goods, the watchman hired by the bank prevented the removal of any of the goods. He stated he was acting on orders from the bank, and this was confirmed by an officer of the...