Simson v. Klipstein

• Decision Date: 28 September 1917
• Docket Number: No. 43/693.,43/693.
• Citation: 88 N.J.Eq. 229,102 A. 242
• Parties: SIMSON et al. v. KLIPSTEIN.
• Court: New Jersey Court of Chancery

102 A. 242

88 N.J.Eq. 229

SIMSON et al.

v. KLIPSTEIN.

No. 43/693.

Court of Chancery of New Jersey.

Sept. 28, 1917.

Bill by Leslie N. Simson and another against Ernest C. Klipstein. On motion to strike out bill. Motion denied.

Harry Wright, of Newark, and Martin Conboy, of New York City, for the motion. Frederick Seymour, of New York City, opposed.

LANE, V. C. The bill in this case was filed to compel specific performance of a contract of sale. The contract is not under seal. it purports to be between the Midvale Chemical Works, an association, as party of the first part, and Ernest C. Klipstein, as party of the second part. It is signed for the party of the first part, Midvale Chemical Works, by George W. Hunter and Leslie N. Simson, trustees. The suit is brought by Leslie N. Simson and George W. Hunter and while in the opening paragraph of the bill they are not termed "trustees," yet by a perusal of the whole bill it is perfectly clear in just what capacity they bring their suit. The contract involves a large amount of property. The consideration is in excess of $200,000. It is dated the 29th day of May, 1917. On the 31st day of May, 1917, Klipstein went into possession of all the real estate and personal property embraced in the agreement, and continued the active operation of the plant. On the 22d day of June, 1917, an adjournment of the closing of the title was had. On the 3d day of July, 1917, deed was tendered. Performance was declined, but Klipstein continued in possession of the property. Annexed to the bill of complaint, and made a part thereof, is an agreement setting forth precisely what the term "Midvale Chemical Works" imports. Leslie N. Simson and George W. Hunter, under the terms of this instrument, "associate ourselves together as trustees, and hereby form an association to be known as Midvale Chemical Works." Article 2 provides:

"The trustees shall have the power to contract and carry on in the name of and for the association, any business which could be lawfully conducted or carried on by an individual, and in the conduct of such business, may use and invest any funds of the association, and shall have full general power and authority to buy, sell, pledge, mortgage, grant, convey and exchange property of every description, real, personal or mixed," etc.

Article 4:

"The trustees shall be deemed the absolute owners of all the property of the association, and both the legal and equitable title to all such property shall be vested absolutely in them, their successors and the survivor or survivors of them, or to their successors, subject only to all applicable terms and conditions of this instrument."

Then follows the provisions with respect to the issuance by the trustees of certain classes of stock, A and B. These certificates give all holders right to participate in the profits of the association and in case of distribution to an interest in the assets. The form of the certificate contains the following:

"The interest represented by this certificate is personal property, irrespective of the nature of the estate of the trustee."

"No certificate holder, or his assigns, heirs, or legal representatives, shall at any time have or claim any legal or equitable interest in the property, whether real, personal or mixed, of the association, and nothing contained herein shall be considered as creating or giving to any certificate holder any interest in or to such property, but such certificate holder shall have an interest only in the net proceeds or profits which may be derived from such property, or in the proceeds of the said property on liquidation or distribution, and only when and as such proceeds may become distributable under the terms of the aforesaid articles of association."

Article 13:

"No certificate holder shall, as such, be a necessary or proper party complainant or defendant in any suit or other judicial proceeding relative to or affecting the property or assets of the association."

Article 14:

"In every written contract that the trustee shall enter into, relating to the business of the association or estate or any part thereof, reference shall be made to these articles and the person, firm or corporation contracting with said trustees shall look to the funds and property, legal and equitable, of the estate for the payment under said contract of any debt, damage, judgment or decree, or any money that may become due and payable in any way by reason thereof," etc.

Article 15:

"No person dealing with the trustees shall be charged with the duty of making any inquiry as to their authority to deal with the property of the association, nor with the application of the purchase money for any property of the association which they may purchase from the trustees," etc.

There are other provisions of the trust agreement which I do not think it necessary, in view of what I have already quoted, to refer to.

To the bill of complaint, an answer in lieu of plea was filed. This answer sets up merely that on the 29th day of May, 1917, and ever since that date certain persons, seven in number, were holders of certificates in the form of Class A, and that, therefore, they are proper necessary, and indispensable parties to the action. There is no allegation that these certificate holders are all of those holding certificates.

A large portion of the voluminous brief of counsel for the defendant is taken up in the discussion of matters which, in my view, are aside from the mark on this particular application. The sole question before me is whether, assuming that the bill of complaint correctly relates the facts, and that the parties bringing the suit have power to bring it, there is a fatal defect in parties complainant. It will be observed that, although the Midvale Chemical Works is named as the first party in the bill of complaint, the contract is signed, "Midvale Chemical Works, by George W. Hunter and Leslie N. Simson, Trustees." By reference to the Articles of Association it appears that it is distinctly provided that the trustees shall have full power to contract and buy and sell; that they shall be deemed the absolute owners of all the property of the association, and the legal and equitable title to all such property shall be vested absolutely in them; that the certificate holders shall have no interest, legal or equitable, in the property, whether real, personal, or mixed; that they shall not be necessary or proper parties complainant or defendant in any suit.

The contract of sale not being under seal, the real parties in interest may be shown. Babcock v. Stobbe (not reported). But the question which is before me is not whether the parties bringing this suit have the right to bring it, or in what capacity it should be brought. It is whether, assuming that they have the right to bring the suit, the parties referred to in the answer in lieu of plea are necessary parties. For the purpose of demonstrating this, the defendant must go to the articles of association, and, upon going there, we find that it is expressly provided that they shall not be either necessary or proper parties.

The principle of law that cestui que trustents are, in some instances, necessary parties in suits dealing with the trust property, is for the benefit of the cestui que trustent. It seems to me, upon the whole, that this case is well within the remarks of Mr. Justice Dixon, delivering the opinion of the Court of Appeals, in Smith v. Gaines, 39 N. J. Eq. at page 549, and Vice Chancellor Pitney in Stevens v. Bosch, 54 N. J. Ecf at page 63, 33 Atl. 294. In the latter case the Vice Chancellor said:

"This is not a suit to administer a trust, or in which the construction of it or the rights between trustee and cestuis que trust arc at all involved. The trustee here represents his cestuis que trust, and the case is clearly within one of the exceptions mentioned by Justice Dixon in...