BACKES, V. C. This is a motion to dismiss the bill, the allegations of which disclose this state of facts: John H. Sebring died May 4, 1878, leaving a last will and tes tament, in the first paragraph of which he devised and bequeathed all of his property, both real and personal, to his executors or the survivors of them, in trust for the purpose of paying his just debts; then to hold the remainder in trust for his wife in lieu of her dower, and then the following:

"Item. After the death or marriage of my said wife to collect all investments and all money due my estate, to sell all unsold real or personal property, and after collecting my whole estate into one general fund, to divide the same, share and share alike among my children to whom and to whose heirs, I give the same forever."

the blending of the proceeds of the real and personal property into one general fund, to be divided share and share alike among the testator's children, was clearly a conversion of the real estate into personal property as of the time of the testator's death. Welsh v. Crater, 32 N. J. Eq. 177, affirmed 33 N. J. Eq. 362; Clark v. Denton, 36 N. J. Eq. 419; Vanness v. Jacobus, 17 N. J. Eq. 153; Cook Exr. v. Cook Adm., 20 N. J. Eq. 375. Deborah M. Titus' proportionate interest in her father's estate was a vested legacy, and upon her death intestate passed to her administrator, her husband, who under the statute, as it then stood, rightfully appropriated it to his own Brown v. Fidelity Trust Co., 82 N. J. Eq. 323, 87 Atl. 222.

use.

The rules of construction laid down in the cases of Roy v. Monroe, 47 N. J. Eq. 356, 20 Atl. 481, Moore v. Robbins, 53 N. J. Eq. 137, 32 Atl. 379, Canfield v. Canfield, 62 N. J. Eq. 578, 50 Atl. 471, and In re Alabone Estate, 75 N. J. Eq. 527, 72 Atl. 427, relied upon by the complainant as sustaining her position that, the sale not having taken place until after the death of Deborah M. Titus, the proceeds pro tanto retained the character of real estate and descended to her heirs, are not applicable. These cases deal with instances where the directions to sell were for the purposes of the will, and where the purposes failed, for one reason or another.

The further contention that, because the real estate was not sold until after the death of Deborah M. Titus, it retained its character as such until then, and descended to her children as "heirs" under the provision of the will directing a division of the estate "among my children to whom and to whose heirs I give the same forever," is without merit. The word "heirs" was, perhaps, used substitutionally, but this need not be decided.

The conclusion arrived at that there was a conversion as of the testator's death and the

fact that the first taker survived disposes of the point.

The bill will be dismissed, with costs.

His wife and seven children, one of whom was Deborah M. Titus, survived. The widow passed away May 7, 1892. Deborah died intestate November 13, 1892, survived by her husband, Isaac M. Titus, who was appointed her administrator, and two children, the complainant and a brother. In February, 1893, the administrator de bonis non of the testator sold two tracts of land for $2,930, one-seventh of which, amounting to $420, was paid to Titus, as administrator. Isaac M. Titus is (Court of Chancery of New Jersey. Aug. 28,

deceased, and this bill is filed against his personal representatives to recover the $420; the complainant setting up that upon the death | of her mother intestate she and her brother became seised of her share or interest in the lands under the will of their grandfather, by descent. The complainant holds an assignment of her brother's claim.

The complainant can maintain her bill only if the proceeds of the sale are to be regarded as real estate of the testator as of the time of her mother's death. The fee in the lands vested in the executors in trust and the absolute direction to them to sell, together with

(88 N. J. Eq. 124) WALKER v. BOURGEOIS et al (No. 33/470.)

1917.)

1. REFORMATION OF INSTRUMENTS 45(5)— EVIDENCE-SUFFICIENCY.

Evidence held to warrant reformation of a deed on the ground of fraud by including a greater description than was intended. 2. DEEDS ~~70(5)—FRAUD-SUFFICIENCY OF EVIDENCE.

Gross inadequacy of consideration for the sale of land is convincing evidence of fraud. 3. PRINCIPAL AND AGENT 158-FRAUD OF AGENT.

In action to reform deed for fraud in description, the question whether one defendant her agent was immaterial, since the principal was a principal and the active defendant was could not take advantage of the agent's fraud.

Bill by Mary Walker against Annie Estell | The other tract mentioned consisted of 2,715 Bourgeois and husband. Decree for com- acres, in which Mrs. Mary Walker was a coplainant. tenant, having an undivided one-sixth interest, which would amount to 452 acres.

Samuel Craig Cowart, of Freehold, for complainant. Bolte, Sooy & Gill, of Atlantic City, for defendants.

LEWIS, V. C. The bill in this case is filed to compel the correction and reformation of a certain deed wherein it is defective either by reason of fraud, mistake, or misrepresentation, and for an accounting of the proceeds of any sale of a portion of the premises conveyed. The original bill also prayed that the complainant might be decreed to have a perfect title in the tract of 3,072.97 acres. Upon demurrer, the prayer of the bill, wherein it sought to quiet the title was stricken out, and the theory upon which the defendant has tried the case is that, unless the complainant shows fraud, misrepresentation, or mutual

mistake, then the bill must be dismissed.

The bill of complaint was filed by Mary Walker, the original complainant, on April 17, 1911. Mrs. Walker died testate on October 6, 1911, and by her will dated December 10, 1897, she devised the tract of land containing 3,072.97 acres in the township of Weymouth, county of Atlantic, and state of New Jersey, to her executor, Samuel C. Cowart, in trust, to sell the same and divide the proceeds of sale and distribute the same to certain devisees therein mentioned, viz., to Amelia H. Hanthorne, George W. Hanthorne, and John Hanthorne one equal half share of the net proceeds of the sale of said lands, and to Joseph Wolfe and Georgie Wolfe, the other equal one-half part of the net proceeds

of the sale of said lands. The executor and

these devisees have been substituted as complainants in the case since the death of Mrs.

Walker.

The testimony shows that Anderson Bourgeois purchased as the agent of his motherin-law the whole of the 2,715-acre tract, and

the complainant claims that he dishonestly he himself drew, a description which includand fraudulently included in the deed, which ed 626 acres of land which belonged to Mrs. Walker separately in fee, viz., to the 3,072acre tract, which she failed to discover until 1909. The description in the deed by metes and bounds covers the 626 acres already mentioned, but the description of the land is followed by the following recital:

the said party of the first part of, in and to "Being all the right, title, and interest of the said land or premises situate in the township, county, and state aforesaid, which they Steelman, aforesaid, the whole being property are entitled to under the will of said Frederick heired by the grantors from John P. Walker, deceased."

The other cotenant who signed the deed had no interest whatever in the 626 acres, and leaving out the metes and bounds set forth in the deed there can be no doubt that the 626 acres would not have passed by the deed.

The question for the court to pass upon, therefore, is whether Mrs. Walker intended to convey the 626 acres, or whether that was included in the description by mutual mistake, or whether Anderson Bourgeois inserted the 626 acres fraudulently, he, undoubtedly, being a very smart, keen business man, thoroughly acquainted with such business, and she, on the other hand, being, as I am convinced, a very simple-minded old lady.

and he did not in any of this correspondence intimate to her that he was purchasing any part of her separate Walker tract, and the agreement which he signed and sent to her for her to execute in duplicate was also a representation to her that he was only pur chasing her undivided share of the Frederick Steelman tract and not any part of her 3,072acre tract.

The correspondence between Anderson Bourgeois and Mrs. Walker shows that in purchasing this tract of land he represented to her that he was buying only her undividThe grantee named in the deed was Rebec-ed share in the Frederick Steelman tract. ca S. Estell, mother of the defendant Annie Estell Bourgeois, and mother-in-law of the defendant Anderson Bourgeois, and the deed is dated October 1, 1894, and was acknowledged by Mrs. Mary Walker on March 9, 1895, before Anderson Bourgeois, one of the defendants, who admits that he also drew the deed and prepared the description in the same. The testimony shows that Mrs. Mary Walker owned a tract of land consisting of 3,072.97 acres in fee simple; and she also owned an undivided one-quarter interest in fee simple in a tract of land known as the Frederick Steelman tract, consisting of about 2,900 acres, adjoining and lying to the south of the 3,072.97-acre tract.

The 3,072.97-acre tract came to her by partition of the land of John P. Walker, deceased, who was her husband's brother, and who died intestate. This tract of land was partitioned to her by the Orphans' Court of Atlantic county over 37 years ago, her husband having devised all his real estate to her on

The bill alleges that Anderson Bourgeois agreed to give Mrs. Walker $2 per acre for her undivided share of the Frederick Steelman tract, but that he only paid her $200 for all her interest in the lands conveyed. The complainant's undivided interest in the Frederick Steelman tract, amounted to about 452 acres, and the complainant claims that under the agreement she should have been paid at least $900 instead of $200 or $250.

In regard to that contention of the complainant, it appears that the reason for selling the tract at such a low figure is that there had been some controversy as to who

as to the quantity of the shares of the cotenants, and as to the number of the cotenants, and the parties who signed the deed now in suit were willing to sell at a very low figure in order to avoid the cost of partition proceedings.

It may be mentioned at this point that Anderson Bourgeois also obtained deeds concerning the same tract from a number of other cotenants (the Frederick Steelman tract). It appears that Anderson Bourgeois did not get all the cotenants to convey away their interest in one deed, although, of course, he might have followed that course. I am inclined to believe that Mary Walker intended to sell her undivided interest in the Frederick Steelman tract for the consideration which was paid to her, notwithstanding that I think Mr. Bourgeois made a most excellent bargain, and that will be my finding in respect to that.

Hence, in order to justify a decree for reforma-
tion in cases of pure mistake, it is necessary
Where the mistake has been on one side only,
that the mistake should have been mutual.
the utmost that the party desiring relief can
obtain is rescission, not reformation. The case
is, of course, different, if any element of fraud
exists;
where there is a mistake on one side, and fraud
for it has been properly held that
on the other, there is a case for reformation."
Welles v. Yates, 44 N. Y. 525; Hitchins v.
Pettingill, 58 N. H. 386.

"To warrant reformation [in the absence of fraud or imposition] there must be mutual mistake." Green v. Stone, 54 N. J. Eq. 387, 34 Atl. 1099, 55 Am. St. Rep. 577.

[3] The question as to whether Mrs. Rebecca S. Estell was a principal and Anderson Bourgeois was merely her agent, or whether Anderson Bourgeois was the principal and Mrs. Rebecca S. Estell merely a trustee, can make no difference, as she could not take advantage of her agent's fraud. I will there fore advise a decree providing for the reformation of the deed in accordance with the above views, and providing, further, for the payment by the defendants to the complainAn-ants of the value of those portions of the premises which have come into the hands of innocent purchasers for value without notice, with interest upon such amounts, compounded at 6 per cent. annually.

In regard to the 626 acres that she owned individually in fee simple, that is a very different proposition. It is shown that in 1892, two years before the date of the deed, derson Bourgeois and his wife were agreeing to purchase from Mrs. Walker at the price of $4 per acre, and which the defendants and Rebecca Estell were actually arranging to include with other lands in a sale to Daniel L. Risley at $5 per acre. Two years after Mrs. Walker acknowledged the deed, she made her will, and devised the tract of 3,072 acres, the 626 acres being a part thereof, thus indicating that she did not know she had conveyed any part of this tract. She also paid the taxes right along up to the time of her death in 1911. The property was wild land, and there was nothing to show that any one else claimed to have an interest in it, except the deed, and I am quite satisfied that she knew nothing about metes and

bounds.

As to the value of these lands which have come into the hands of innocent purchasers the testimony shows that by the defendant Bourgeois' offer made about two years before the time of the conveyance, they were of the value of $4 an acre. I think, therefore, the value of these lands was at least that amount, and if the complainants are satisfied that that represents the fair value of these lands I will fix the amount of the decree upon that basis. If they are not so satisfied, then I will refer it to a master to take testimony as to the actual value of the lands at the time of the conveyance to Mrs. Estell. I will, on application, settle the details of the decree.

[1, 2] I am fully satisfied that Mrs. Walker had not the faintest idea that she was conveying the 626 acres by this deed, and the gross inadequacy of the consideration to my mind is convincing evidence of fraud, especially taken in connection with clear evidence of imposition and actual fraud practiced by Mr. Bourgeois on Mrs. Walker, who undoubtedly placed the utmost confidence and reliance in him, and even trusted him to 1. INJUNCTION 137(2) · draw the deed. It is quite clear to my mind that none of the other cotenants who also joined with Mrs. Walker in signing the deed had any idea that any part of Mrs. Walker's separate property, in which they had no terest, was being conveyed, and Mr. Bourgeois must have known it, as he was a man of large experience and well acquainted with the properties.

(88 N. J. Eq. 237) GENERAL INV. CO. et al. v. BETHLEHEM STEEL CORP. et al. (No. 43/42.) (Court of Chancery of New Jersey. Sept. 28, 1917.)

TEMPORARY INJUNCTION - GROUNDS FOR DENIAL INJURY TO DEFENDANT.

On an application for a preliminary injunetion restraining a corporation from increasing its capital by issuing a new class of preferred in-stock, where the application is made by a professional privateer who purchased a comparatively small amount of stock with notice of the plan to issue such new stock and for the specific purpose of preventing its success, and who has a long history of similar efforts, the court may weigh conveniences, and where it appears that "To reform a contract, and then enforce it the corporation is engaged in work for the govin its new shape, calls for a much greater ex- ernment and is in urgent need of money which ercise of the power of a chancellor than sim- it has endeavored to raise in some other way, ply to set the transaction aside. Reformation and that to prevent the scheme going through is a much more delicate remedy than rescission. I might be disastrous to a vast majority of the

stockholders, the injunction will be denied with-
out passing on the questions raised as to the
corporation's right to issue such stock; such
questions being arguable and involving the con-
struction of many sections of the statute.
2. CORPORATIONS 66, 388(4)-ESTOPPEL TO
DENY CORPORATE POWERS.

A corporation and its stockholders by unanimous consent may issue new preferred stock to be placed ahead of the existing preferred stock and redeemable above par and convertible into common stock without giving the existing preferred stockholders a pre-emptive right to subscribe to such new stock, or at least may estop themselves from questioning the legality of the issuance of such stock.

of the present plan and for the specific purpose of preventing its success. He is entitled from a court of equity to only such consideration as that court is absolutely bound under the rules of law to accord him. The company at the present time has a preferred stock issue of $15,000,000, and a common stock issue of $60,000,000. The common stock is divided into two classes, 15,000,000 termed "common," and 45,000,000 termed "common class B." The voting power is possessed only by the preferred 15,000,000. and the common 15,000,000. It is now pro

3. CORPORATIONS 387(2) — PERSONS ENTI-posed to issue a new stock to the amount of TLED TO QUESTION CORPORATE POWERS.

If the issuance of a new class of preferred stock by a corporation with the acquiescence of its stockholders is ultra vires, the sole person who may attack its issuance is the Attorney General on behalf of the state, and a professional agitator purchasing a small amount of stock for the purpose of preventing such issuance is neither a proper representative of the Attorney General nor a proper representative of a class. Suit by the General Investment Company and another against the Bethlehem Steel Corporation and others. On application for a preliminary injunction. Order to show cause discharged.

See, also, 100 Atl. 347.

$30,000,000 at a dividend rate of 8 per cent. which will be preferred, as to dividends, to the present preferred and common and will share in distribution with the present preferred pari passu. This stock is to be redeemable at the option of the corporation after three years at 115. It is to be convertible into common class B at the option of the holder at any time.

The objections raised I will consider, I think, in the order of their importance. It is insisted by the complainant that the proposed scheme violates his contract rights evidenced by the certificate of incorporation, or McCarter & English, of Newark (Robert the amended certificate of incorporation. H. McCarter and Arthur F. Egner, both of That certificate provides in terms that the Newark, of counsel), for complainants. Lind- present preferred stock shall be preferred as abury, Depue & Faulks and Pitney, Hardin to dividends over all other stocks of the cor& Skinner, all of Newark, and Paul D. Cra-poration. It further provides that the comvath, of New York City (Richard V. Linda-mon stock shall be entitled to all the surplus bury and John R. Hardin, both of Newark, of counsel), for defendants.

LANE, V. C. (orally). This is an application for a preliminary injunction restraining the Bethlehem Steel Corporation from increasing its capital by the issuance of 30,000,000 of stock termed "eight per cent. cumulative convertible preferred." A meeting is to be held to-morrow at 11 o'clock. The Court of Errors and Appeals, I understand, is in session, and application for any ad interim relief on appeal may be made to that court to-morrow morning. That is the reason why I have changed my mind and have concluded to decide the case at this time.

earnings as dividends after payment of dividends upon the present preferred. It is argued that the effect of this certificate is practically an agreement on the part of the corporation and its stockholders that at all times present preferred shall be entitled to these dividends in preference to dividends on any other stocks, and that the common is entitled to all surplus earnings; that in effect it is an agreement that no other stock will be created which will change the rights of the preferred and common as stated in the certificate. The case of Pronick v. Spirits Distributing Co., 58 N. J. Eq. 97, 42 Atl. 586, opinion by Vice Chancellor Emery, is cited as authority. He held that, notwithstanding the The application is made by General Invest- broad power of amendment which was at ment Company and Continental Securities that time included in the statute, the rate Company, other names for one Venner. They of dividends fixed by the certificate of incorare holders, respectively, of 100 shares of the poration could not, without the assent of all present common and 100 shares of preferred the stockholders, be reduced. The hearing stock and the application is made on behalf before the Vice Chancellor was on an applicaof both interests. Venner (and I shall use tion for a preliminary injunction. The case his name in place of the names of his cor- never went to the Court of Appeals. The porations) bought his common stock in Janu- Vice Chancellor also held that the stockholder ary of this year, as I find for the sole pur- had no adequate remedy at law. By the expose of harassing in any way that he could press terms of the statute, all its terms are the stockholders and directors of this corpo- read into every certificate of incorporation, ration. At the time, the specific purpose that and it is insisted for defendant that under he had in mind was to prevent a scheme of the provisions of section 27 the corporation financing which was then under discussion. may, by amendment, create one or more classHe bought his preferred stock after noticeles of preferred stock, with the consent of

retire it, and is really a purchase for retirement, still it would seem that, had the Legislature intended that the stock might not be made redeemable for more than par, it would not have in express terms provided that it might be made redeemable at not less than par.

two-thirds of the existing stock. When the stockholder bought into the concern, he bought into it, of course, charged with the knowledge not only of what was in the certificate of incorporation but what was in the statute, and it is insisted that one of the risks that he took was that, if two-thirds of his associates deemed it wise to issue a preferred stock, the It is next objected that the present preeffect of which would be to alter the rights ferred stock is not given the right to subof the then existing stockholders, he must scribe to the new preferred. Generally acquiesce therein. There is no decision that speaking, I think the law is well settled that, has been brought to my attention which is unless there is something in the certificate of directly in point. The determination of the incorporation to the contrary, the rights of question is of the utmost importance, not preferred and common stockholders are equal. only in the present case, but because a prece- Whether a particular right is enjoyed equaldent will be created one way or the other. ly by both, however, must depend upon the The next objection is that there is found reason for the existence of the right; at nowhere in the statute a right to create a least, a very strong argument may be made preferred stock convertible into common. to that effect. It will be observed that the There is no express provision in the statute present preferred has no right in the assets which warrants this. There is an express except to the extent of par and accrued diviprovision permitting a conversion of pre- dends. The reason for the existence of the ferred into bonds, and it is argued that the pre-emptive right of subscription is that fact that the Legislature has provided spe- the relative rights of the existing stockholdcifically for such conversion is an indication ers both in the assets of the company and in of the legislative intent not to permit the is- its control may not be altered. The relative suance of preferred which may be converted interest of the present preferred stock in the into any other class of security than that assets of the company is not affected by the specifically provided by the statute. On the present scheme. The proposed preferred other hand, the company unquestionably may stock has no voting power, so that the relaissue preferred stock and may retire that pre-tive interest in the control is not affected. ferred stock by buying it with the acquies- It is argued with force that to permit the ence of its holders and may issue common which may be purchased with the proceeds of preferred. It may, I have no doubt, issue a preferred stock with preferences for a limited length of time, say 10 years, and thereafter only to have the rights of common. What is now sought to be done is to issue a preferred with limited preferences, the time when the preferences will cease being at the option of the holder of the stock. I had some doubt as to whether, if this plan were carried out, it might not, in some cases, result in the issuance of a common stock for less than par; for, at the time the common stock might be issued, the preferred might be worth less than par. The answer is that the common and preferred, although divided into two classes, are really issued as one; it is really the issuance of one stock, and, at the time the stock is issued, the corporation gets its par.

present preferred to subscribe for the proposed preferred would be to permit a change in the relative rights of the present preferred and common and would be illegal. Of course, if the reason for the rule fails, the rule is not to be applied.

[1] Now, I am asked upon this preliminary application to determine these very important questions, none of which have ever been determined by the courts of this state, so far as I know, by a man who bought into the situation in the manner I have described, who has a long history of similar efforts, a professional privateer. I recognize the rule, of course, that, whatever his motive, the legal rights of the complainant must be protected; that is, such legal rights as cannot be protected in a court of law. I also recognize that, notwithstanding the rule that to doubt is to deny, to doubt is to grant, where the subject-matter of the litigation will be destroyed if the relief prayed for is not granted. It seems to me that in a situation of this kind, where the utmost that can possibly be urged by complainant is that the questions may be arguable, a court is entitled to weigh con

The next objection is that there is no legal warrant for the redemption of preferred stock at more than par. This argument is based on the provisions of section 29, which provides for retirement. The section specifically provides for retirement and only re-veniences. There is no question but that this tirement, and limits the company to payment of par. In section 18, the Legislature has provided that preferred stock may be made redeemable at not less than par. It is argued that the two sections must be read together. It seems to me that the Legislature clearly had in mind two things, and although it may

company, I think the second largest steel corporation in this country, is desperately, urgently in need of this $30,000,000, at this time, not a year from now. There is no charge of fraud or bad faith. The controlling interests have endeavored to raise funds by every other means, and finally have conclud