Seacoast R. Co. v. Wood

• Decision Date: 28 November 1903
• Citation: 56 A. 337,65 N.J.E. 530
• Parties: SEACOAST R. CO. et al. v. WOOD et al.
• Court: New Jersey Court of Chancery

56 A. 337

65 N.J.E. 530

SEACOAST R. CO. et al.

v. WOOD et al.

Court of Chancery of New Jersey.

Nov. 28, 1903.

Suit by the Seacoast Railroad Company and the Atlantic City Railroad Company against R. Francis Wood and others. Decree for complainants.

This bill is filed to obtain a decree that R. Francis Wood holds the legal title to two lots of land in Cape May City, now occupied by the complainant for terminal use. In trust for the Seacoast Railroad Company; and also to obtain an injunction against the further prosecution of an action in ejectment brought by said Wood to dispossess the Atlantic City Railroad Company. The gravamen of the bill is that these two lots were bought by Edward R. Wood, as agent of the Philadelphia & Seashore Railroad Company; that Wood took the title to the lots in his own name; and that the present holders of the legal title to the lots, and mortgagee, are not purchasers for valuable consideration. The Atlantic City Railroad Company are lessees of the Seacoast Railroad Company, and successors to the rights of the Philadelphia & Seashore Railroad Company.

The history of the transaction, of which the present litigation is the sequence, is as follows: In 1889 a project was conceived of building a railroad, which, by connecting with the Camden & Atlantic Railroad at Winslow Junction, would connect Philadelphia with Cape May City. Mr. Edward R. Wood appears to have been the leading mind in conceiving this enterprise. Before the organization of any company, but after a number of gentlemen had been persuaded to join Mr Wood in the railroad enterprise, Mr. Wood took measures to secure options for rights of way for the projected road. Instead of having a single corporation for a road running from Winslow Junction to Cape May City, two corporations were organized at different dates, obviously for the purpose of avoiding the necessity of paying the full amount of $2,000 per mile required by the laws of this state upon filing a certificate for a railroad corporation. Both certificates for these two roads were executed in August, 1889, the first on August 6th, and the second August 8th. The certificate for the first company was filed on November 18,

1889, under the name of the Philadelphia & Seashore Railroad Company, which ran from Winslow Junction to Sea Isle City. The second certificate of incorporation for a road which was to run from Sea Isle City to Cape May City was not filed until February 4,

1890. Whatever the purpose in filing two certificates instead of one was, it appears conclusively that those concerned in the venture regarded and treated the two certificates as designed to effect a single purpose, and proceeded to build a road upon that theory. As already remarked, before the first certificate was filed, Mr. Wood began to secure options from landowners for rights of way; not alone between Winslow Junction and Tuekaboe, but also between the latter place and Cape May City. As it was of the utmost importance that property for a terminal in Cape May City should be secured, Mr. lames E. Taylor, who was afterwards secretary of the roads, at the instance of Mr. Wood negotiated for options for the two lots now in question in Cape May City. Mr. Taylor says that he got options for these two lots in the name of the Philadelphia & Seashore Railroad Company. One of these lots belonged to a Mrs. Schellinger and the other to Dr. Mecrey. Whether these options were taken in the name of Mr. Wood or in the name of the Philadelphia & Seashore Railroad Company is not a matter of importance. The purpose of obtaining these options, and subsequently the deeds for the lots, is manifested by the correspondence between Mr. Wood and Mr. Taylor. On October 5, 1899, the date of the incorporation of the first road being November 18th, Mr. Wood wrote to Mr. Taylor concerning the Mecrey, Schellinger, and other properties. He says: "I feel as if $30,000 was about the limit that the company can afford to pay for its terminal real estate at Cape May, and including the Town properties and the Wales field in the rear, it will take careful management to secure them at that figure. The Wales property and Mrs. Schellinger are the trying points, and an option should be secured fixing the price of those two at least. Probably you may know some one who can act for you to more advantage, as you are known to be connected with the new railroad company. 1 will send you $100 for option money." On August 9th Mr. Wood wrote Mr. Taylor: "I enclose you a check for $120 so that you can draw the notes and hand a part of the amount to L. M. Hall to secure the Schellinger property on sixty days option at once. Unless you have some immediate use for the twenty dollars balance, you can put it in the New Jersey Trust and Safe Deposit Company to this company's credit. I shall keep a small account there." These letters were written on the letter head of the Philadelphia & Seashore Railroad Company, of which company Mr. Wood was then treasurer. On October 12th Mr. Wood wrote to Mr. Taylor: "I write to acknowledge receipt of option papers for the Delaware House [this was the Mecrey property] covering one hundred dollars of remittance made and what disposition shall be made of the twenty dollars remaining. * * * One or two acres and the rigbt of way is all that will be needed for railroad purposes. It might be better simply to get a price upon a certain piece of it, say about two acres for some purpose. It is desirable to get these properties arranged for as soon as possible, because no one never knows how soon a thing of this sort may leak out, and in that case we had better get our business with councils started as soon as possible." On November 20th Edward R. Wood resigned as director and treasurer of the Philadelphia & Seashore Railroad Company, and on November 27, 1889, there was an agreement entered into between that road and Mr. Wood by the terms of which agreement Mr. Wood agreed to build the line of railroad from Winslow Junction to Sea Isle City. This agreement is displayed at length in the opinion of Vice Chancellor Bird in the case of Wood v. Boney (N. J. Err. & App.) 21 Atl. 574, and again in the opinion of Vice Chancellor Pitney delivered in the case of Baker v. Guarantee Trust & Safe Deposit Co. (N. J. Ch.) 31 Atl. 174. It is sufficient for the present purposes to point out that the agreement provides that the railroad company would assist in organizing a railroad from Sea Isle City to Cape May City. The railroad company agreed that any contract it might make for building this Cape May road should be given to Mr. Wood upon the same general terms as contained in the contract of the one then executed. The price to be paid to Wood for building the road to Sea Isle City was $550,000 worth of first mortgage bonds and the same amount of stock, and he was to be paid for building the road from Sea Isle City to Cape May $350,000 worth of stock of the contracting company and the same amount of first mortgage bonds. . The eighth item of the agreement provided that the costs of securing the rights of way should be borne by Wood, and the third section provided that Wood should erect suitable stations. After the execution of the agreement, Wood proceeded in the acquisition of the title to lots for rights of way; and his purpose was evidenced by letters written on November 27, December 5, 12, 18, and 19, 1889, and January 6, 1890, and February 20, March 1, and March 9, 1890. On January 11, 1900, Mr. Wood took a deed from James Mecrey for the Mecrey lot, and on January 17, 1900, from Wm. S. Schellinger for the Schellinger lot. Both deeds were made to Edward R. Wood. The articles of association for the incorporation of the Cape May & Tuckaboe Railroad Company, running from Sea Isle City to Cape May, had not yet been filed. Mr. Wood, on August 1st of the same year, conveyed these lots to one Burleigh, obviously to enable Burleigh to mortgage the property, which Burleigh did by making a mortgage to Wood, trustee, conditioned for the payment of $8,500 in five years. Wood at the same time executed a declaration of trust, in which he declared that he held the said property for the estate of Mary and Julianna Wood, of which estate he, with George and Redmond Wood, were trustees. Wood had taken the money belonging to this estate for the purpose of paying the cash amount of the consideration for these two properties. Burleigh, on August 2d, conveyed the equity of redemption in these properties to Wood, and then Wood conveyed them to R. Francis Wood, the present defendant in this suit. The conveyance was made to R. Francis Wood for the purpose of securing the estate for the money which had been used to pay in part for the properties. Assuming that these properties were bought for the Philadelphia & Seashore Railroad Company, the way in which the complainants are interested in the lots is this: The property and franchises of both roads, namely, the Philadelphia & Seashore Railroad Company and the Cape May & Tuckahoe Railroad, were judicially declared insolvent. A receiver was appointed for each. These receivers sold the property and franchises of each company to the South Jersey Railroad Company. This company in turn became insolvent, and in the course of the proceedings taken its receiver sold its property and franchises to the Seacoast Railroad Company. The Seacoast Railroad Company, on May 2, 1898, leased all its property to the complainant for the term of 999 years.

C. E. Cole and R. H. McCarter, for complainants.

J. H. Gasklll and S. H. Grey, for defendants.

REED, V. C. (after stating the facts). The testimony exhibits Mr. Edward Wood in his relations to these railroads as promoter, director, and contractor. All that he did previous to the incorporation of the first road clearly appears to have been for the use and benefit of both companies when thereafter organized. Even the scheme for executing a contract by which Mr. Wood was to build...