N. J.) ALLMAN v. UNITED BROTHERHOOD OF CARPENTERS, ETC. 117 ing order, the defendants might have come in and answered the bill on oath, and such answer would have been evidence for them on motion to dissolve the injunction, or in resisting its issuance, notwithstanding the prayer for answer without oath. Ireland v. Kelly, 60 N. J. Eq. 308, 47 Atl. 51. But no answer is required without a subpoena compelling it. [2] If a complainant could obtain a preliminary injunction and not summon the defendant to answer the bill, he could thereby perpetually enjoin him without litigating the matter in dispute between them, unless the defendant voluntarily appeared and answer and any person employing or intending to employ the complainants or any of them. The bill was filed July 24, 1911, and an order was made thereon the same day, commanding the defendants to show cause on the 1st day of August then next why an injunction should not issue according to the prayer of the bill, and also ordering that in the meantime, and until the further order of the court, the defendants and each of them, their agents, servants, attorneys, confederates, and any and all persons acting in aid of or in conjunction with them or any of them, be restrained from conspiring, agreeing, or combining to obstruct or prevent any of the complainants from procuring employ-ed. Ordinarily defendants do not voluntariment, and from interfering with any person, firm, or corporation employing any of them, and from declaring or threatening any boycott against any of them, and from declaring or threatening any boycott against any of the products of any person, firm, or corporation employing them, and from printing, issuing, publishing or distributing any copy of any newspapers, magazine, circular, letter, or document which shall in any manner refer to any of the complainants or their association, Local Union 1787, as being nonunion, unfair, or scabs, and from procuring the dismissal from employment of any of the complainants. On the return day an order was made on application of defendants' counsel continuing the hearing on the order to show cause to August 22, 1911, and on that date the matter was continued to August 24, 1911, when it came on to be heard upon bill and affidavits, and on affidavits on behalf of defendants, in the presence of counsel of both parties. As one of the contentions on behalf of the defendants, it was urged that no injunction should be awarded, and that the bill should be dismissed, because no subpoena ad resp. had been taken out and served upon the defendants, although four weeks had elapsed since the filing of the bill. [1] It is entirely settled that upon the issuance of a preliminary writ of injunction a subpoena must be taken out and served. Lee v. Cargill, 10 N. J. Eq. 331. The penalty for neglect is dissolution of the injunction. If a preliminary injunction had issued in this case, instead of a temporary restraining order, the motion now made on behalf of the defendants would have to be granted. In Lee v. Cargill, Chancellor Williamson said that the practice would be thereafter strictly followed, requiring the subpoena to be taken out with the writ of injunction and returned into court within the time prescribed by the rule for return of service of the injunction. The reason is that the suitor who would restrain his adversary must use due diligence in expediting the cause. The bill in this cause prays for an answer without oath, but, upon the issuance of either a preliminary injunction or a preliminary restrain ly appear. They are generally unwilling to [3] There is a material distinction between a restraining order and an injunction. 16 Am. & Eng. Ency. (2d Ed.) p. 349; Dean v. Bonnell, 4 N. J. Law J. 348. In this case (Dean v. Bonnell) the bill for injunction was filed and an order to show cause, including a restraint, was made, and the hearing thereon adjourned several times, and then a motion was made on the part of the defendant to dismiss the bill on the ground that no subpœna to answer had been issued. Vice Chancellor Dodd observed that the case of an order to show cause was different from that of an injunction, the order itself com manding the defendant to show cause on a | are nonunion, unfair, or scabs, and in that certain day being sufficient to bring him into court. respect the restraining order is too broad, and it would, therefore, to that extent have to be modified. All that the defendants did in this regard was to publish in their official journal "The Carpenter" in the April number, 1911, "that Local Union 1787, by orders of the G. E. B. (General Executive Board) has been and at this moment stands suspended from our organization." It was not prov repeating even this assertion. In this situation a preliminary injunction should be refused. Penną. R. R. Co. v. National Docks Ry. Co., 52 N. J. Eq. 555, 30 Atl. 580. The other part of the case refers to the alleged unlawful suspension of Local Union 1787 from the national body and the prayer for restoration to membership, and of attempts of the defendants to prevent the complainants from obtaining employment by means of the boycott, threats, etc. As to this, the denials of the defendants under oath are as explicit as the sworn assertions of the complainants, and put the facts relied upon for the injunction in such a state of equipoise or doubt as, under the well known rule, to forbid of the issuance of a preliminary injunction. It is perfectly well settled that, whenever the complainant's case is doubtful on the law or the facts, a preliminary injunction will not issue. To doubt is to deny. Upon the authorities, therefore, my conclusion is that a subpoena is not required to be taken out with a restraining order which commands the defendant to appear on the return day and show cause why an injunction should not issue, but that when a preliminary injunction issues ex parte upon the filing of a bill without any order to showed that there is any threat or intention of cause being made, as it sometimes does, it runs, to use its language, until the defendant "shall have fully answered the bill of complaint, and our said court shall make other order to the contrary"; and, if the defendant would seek to have the restraint removed, he must answer (unless the chancellor shall allow the motion to be heard on affidavits under rule 123), and he can be compelled to answer only by the service of subpoena for that purpose. He is never obliged to appear voluntarily. If on the hearing of an order to show cause a preliminary injunction is awarded, then a subpoena must be issued with the injunction, and, if it is not issued and returned served within the time prescribed by the rule for the return of the injunction (Lee v. Cargill, ubi supra), the injunction would be dissolved on the defendant's motion. To make this motion, the defendant, not being in court by plea, answer, or demurrer, would have to appear formally for the purpose. Groel v. United Electric Co., 68 N. J. Eq. 249, 251, 59 Atl. 640. And if the defendant desires to appear specially for the purpose of making the motion to dis-sonable dispute. Roberts v. Scull, 58 N. J. Eq. 396, 43 Atl. 583. solve only, and not to have his appearance operate to clothe the court with jurisdiction over him generally in the suit, he must doubtless obtain leave of the court to enter such an appearance. Dan. Ch. Pl. & Pr. (6th Am. Ed.) 453. In the unreported case of Reimers v. Magowan (July 9, 1901, Docket 23, p. 389), in which a preliminary injunction had issued without a subpoena having been issued and return served within the time in which the injunction was returnable, counsel for the defendant Skirm applied for and obtained leave from Vice Chancellor Reed to appear specially for the purpose of moving to dissolve the injunction as to him, and, such appearance being entered, the injunction was on hearing of the motion dissolved as to that defendant. This brings me to the consideration of the propriety of the issuance of a preliminary injunction. In the first place, let it be stated that there is neither allegation nor proof that the defendants have printed or distributed any magazine or document asserting that Local Union 1787 or its members [5] To justify the issuing of an interlocutory, must exhibit a right free from doubt or reainjunction, the case made by the complainant count of the alleged illegal suspension from [4] As to restoration to membership on acthe national body of Local Union 1787, a the national body of Local Union 1787, a mandatory injunction would be required, and such writs are rarely granted before final hearing, and are, as a general rule, strictly confined to cases where the remedy at law is plainly inadequate. Lord's Ex'rs v. Carbon, Iron Mfg. Co., 38 N. J. Eq. 452. It was conceded on the argument that this case did not fall within the exception to the rule. Therefore no mandatory injunction may preliminarily issue for the restoration of the local to the general body. Other questions raised and discussed on the hearing are without controlling force, and it is unnecessary to decide them. Upon this whole matter I am constrained to the conclusion that the complainants are not entitled to a preliminary injunction, and the restraining order must therefore be dissolved. No costs will be awarded on this application. The costs will abide the event of the suit. N. J.) (79 N. J. E. 70) BALLANTINE v. YOUNG BALLANTINE et al. v. YOUNG et al. (Court of Chancery of New Jersey. Sept. 26, 1911.) 1. CORPORATIONS (§ 157*)-STOCK-DIVIDENDS -CASH DIVIDENDS. Where a corporation which had accumulated a surplus several times greater than its capital, in addition to its usual dividend, declared a 200 per cent. dividend, at the same time giving the stockholders power to subscribe at par for a new issue of stock of the same amount, the dividend was a cash dividend, and not a stock dividend. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 584-586; Dec. Dig. § 157.*] 2. LIFE ESTATES (§ 15*)-CORPORATE STOCK DIVIDENDS-CASH DIVIDENDS. While ordinary cash dividends, where stock is bequeathed to one for life, remainder to another, go to the life tenant, the extraordinary dividends are apportioned between him and the remainderman; and hence, where a corporation which had accumulated a surplus several times greater than its capital, in addition to its regular dividend, declared a 200 per cent. dividend, at the same time giving the stockholders the power to subscribe for a new issue of stock of the same amount, the dividend was extraordinary, and should be apportioned in the ratio that the surplus at testator's death bears to the whole surplus accumulated up to the time it was declared. [Ed. Note. For other cases, see Life Estates, Cent. Dig. §§ 34, 35; Dec. Dig. § 15.*] 3 TRUSTS (§ 217*)- MANAGEMENT OF PROPERTY-INVESTMENTS. Where trustees under a will held the legal title to stock in a corporation which paid very large dividends, and had accumulated a very large surplus, the trustees were, upon the declaration of an extraordinary cash dividend, justified in investing the dividends in a new is sue of stock, which the corporation at the same time offered its stockholders at par. 119 is an extraordinary dividend, and must be apportioned between the life tenant and the remainderman. [Ed. Note.-For other cases, see Life Estates, Dec. Dig. § 15.*] 7. LIFE ESTATES ($ 15*)-CORPORATE STOCKNEW STOCK-APPORTIONMENT. In apportioning a stock dividend between the life tenant and the remainderman, the apportionment should be made on the basis of the company's accounts. [Ed. Note.-For other cases, see Life Estates, Dec. Dig. § 15.*] 8. LIFE ESTATES (§ 15*)-CORPORATE STOCK NEW STOCK-CAPITAL. Where corporate stock, which stock, which was bequeathed to one for life and remainder to another, secured the holder the right to purchase on favorable terms shares of another corporation, that right is capital belonging to the remainderman. [Ed. Note. For other cases, see Life Estates, Cent. Dig. §§ 34, 35; Dec. Dig. § 15.*] Bill for directions by Jeanette Ballantine and others, as trustees of the will of John Ballantine, against Alice J. Young and others. Instructions given. See, also, 76 N. J. Eq. 613, 75 Atl. 1100. John O. H. Pitney, for complainants. Gilbert Collins, for remaindermen. Chauncey G. Parker, for life tenants. STEVENS, V. C. This is a bill filed by trustees of the will of John Ballantine, asking for directions. [1] The testator owned 25 shares of the Central Trust Company of the par value of $50 each. Its capital stock was $1,000,000. Its undivided surplus at the time of testa [Ed. Note. For other cases, see Trusts, Cent. tor's death (April 27, 1895), $5,776,113.70. It Dig. §§ 301-309; Dec. Dig. § 217.*] paid regular semiannual dividends at the annual rates of, first, 50 per cent., then 60 per cent., and then 80 per cent. On April 28, 1909, the surplus had increased to $15,579,696.65. In June 1909, its capital stock, by appropriate action on the part of the directors and stockholders, was increased to $3,000,000. The stockholders were given the right to subscribe at par for the new issue of $2,000,000; that is, each stockholder might subscribe for two new shares for every old one he held. Contemporaneously a special or cash dividend of 200 per cent. was declared. The trustees took this dividend and used it to pay for the new stock, which stock they still hold. Where trustees under a will were authorized to continue any investments or securities, and part of the estate consisted of stock in a corporation which, to treble its capital stock. in addition to the regular dividend, declared a 200 per cent. cash dividend, and gave all shareholders the right to purchase two new shares for each share they then owned, the trustees having purchased such shares were entitled to By his will, testator gave his residuary bold them; for by investing a cash dividend in estate to trustees in trust (speaking generalstock they merely preserved their proportionate ly) to pay over a part of the income to interest in the property, and did nothing more than continue their investments. [Ed. Note.-For other cases, see Trusts, Dec. Dig. 217.*] 6. LIFE ESTATES (§ 15*)-CORPORATE STOCK— NEW STOCK. his children during their respective lives. and at their deaths to divide certain parts of the principal among his grandchildren. The first question is, Who is entitled to the dividend of the Central Trust Company issued under the circumstances above described, the life tenants or the remainder Where corporate stock was bequeathed to one for life, remainder to another, and the corporation, in the form of a dividend, issued new stock to all stockholders, the stack so issued men? *For other cases, see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep'r Indexes The next question is whether the trustees have the right to hold the stock that may remain unsold after the charge is satisfied. It seems to me that, having the right to take the stock, which, after it was taken, gave them no greater interest in the company than they had before-merely changed the form of their holding they have the right to retain it. The authority given by the will is "to continue any investments or securities." By agreeing to take the company's stock in exchange for the company's money, they are merely preserving their proportionate interest in the property, and so doing nothing more than continuing their investment in it. It seems to me plain that the dividend is | cash dividend (Malam v. Hitchens, supra), a cash dividend, and not a so-called stock the relative rights of the parties are easily dividend. There is nothing, either in the adjusted. So much of it as may be needed substance or form of the transaction, that will be sold to satisfy the charge. indicates that it was other than what it purports to be. Gray v. Hemenway, 206 Mass. 126, 92 N. E. 31, 138 Am. St. Rep. 377. It is true that the company at the time it declared the dividend gave an option to subscribe to the new stock, and that its officers anticipated that the new stock would be paid for with the cash dividend; but it did not attempt to compel the subscription. The stockholder could do as he pleased. He would, almost as a matter of course, elect to take the stock with the money thus provided; for the stock was selling for many times more than its par value. [2] Ordinary cash dividends go, of course, to the life tenant. Is this an ordinary or an extraordinary dividend? It seems to be extraordinary for three reasons: (1) It was declared in addition to the regular dividend; (2) it was much larger, exceeding the net profits made in the preceding year; and (3) it was evidently made for the special purpose of enabling the stockholders to avail themselves of the new subscription. If these concurring circumstances do not make the dividend extraordinary for the purpose of apportionment, I do not know what could make it so. The distinction has been adverted to, apparently with approval, by the Court of Errors, in the Lang Case, 57 N. J. Eq. 326, 41 Atl. 705, and I do not feel at liberty to disregard it. I, therefore, think, on the doctrine of that case, that the dividend is apportionable between principal and income in the ratio that the surplus at testator's death bears to the surplus accumulated thereafter up to the time the dividend was declared. [3-5] The trustees, as a matter of fact, took the dividend and invested it in the new shares, which sell at a very large premium. They were justified in doing so. Bouch v. Sproule, 12 App. Cas. 385; Malam v. Hitchens (1894) 3 Ch. 578; and so the next question is, To whom does this premium belong? To the life tenant, or to the remaindermen? It has been held repeatedly that the right to subscribe for new shares which command a premium is a part of the principal, and belongs to the latter. De Koven v. Alsop, 205 Ill. 309, 68 N. E. 930, 63 L. R. A. 587; Davis v. Jackson, 152 Mass. 58, 25 N. E. 21, 23 Am. St. Rep. 801; Greene v. Smith, 17 R. I. 28, 19 Atl. 1081; Hite v. Hite, 93 Ky. 257, 20 S. W. 778, 19 L. R. A. 173, 40 Am. St. Rep. 189; Eisner's Appeal, 175 Pa. 143, 34 Atl. 577; Richmond v. Richmond, 123 App. Div. 117, 108 N. Y. Supp. 298; Brown v. Brown, 72 N. J. Eq. 667, 65 Atl. 739. That the trustees have actually subscribed for and taken the shares cannot alter the legal rights of the parties. By giving the life tenant a charge upon the [6] The next question relates to the socalled 15 per cent. stock dividend of the Delaware, Lackawanna & Western Railroad Company. This represents surplus earnings invested in the stock of two branch roads, now merged with the main road, and about $3,000,000, applied in 1907, to the payment of maturing bonds issued as part of the capitalization. The whole sum represents surplus permanently devoted to capital account. To whom does this dividend belong? It is strongly contended that it belongs to principal. I feel compelled, however, by the state of the authorities to hold that it is, in part, income, and that it should be apportioned between the life tenant and the remaindermen. While the case of Van Doren v. Olden, 19 N. J. Eq. 176, 97 Am. Dec. 650, was somewhat, in other respects, shaken by the decision in the Lang Case, it was not disapproved on this point. On the contrary, it was, apparently without much or any discussion, followed by the Court of Errors in Ashhurst v. Potter, 29 N. J. Eq. 625. While this latter case stands, there cannot be any doubt as to what this court must do. Since it was decided, the question has undergone discussion by the Supreme Court of the United States, in Gibbons v. Mahon, 136 U. S. 549, 10 Sup. Ct. 1057, 34 L. Ed. 525, and by the courts of last resort in England, in Massachusetts, in Illinois, and other New England States, in all of which it has been held that issues of stock based on earnings are part of the principal. On the other hand, the Court of Appeals of New York, in McLouth v. Hunt, 154 N. Y. 179, 48 N. E. 548, 39 L. R. A. 230, and some Western and Southern state courts have followed Pennsylvania in giving stock dividends to the life tenant. As a matter of logic, it is difficult to resist the reasoning leading to the conclusion that stock dividends are, in fact, principal; for the life tenant, as is universally held, is not, in the absence of fraud or improper conduct, entitled to the earnings until they are distributed. They are not, in fact, distributed, N. J.) LEYDEN v. LAWRENCE 121 [Ed. Note. For other cases, see Insurance, Cent. Dig. § 1509; Dec. Dig. 8 606.*] · capital account when new stock is, without | subrogated pro tanto to the rights of the mortany money equivalent, allotted to the whole gagee under the mortgage. body of stockholders. But discussion is out of place, for Ashhurst v. Potter is, as I have said, controlling. I would merely add that in most cases, at least, stock dividends can hardly be called regular or ordinary dividends. They must, as a rule, be extraordinary. They represent no particular part of the earnings or surplus. Like all the other stock, they represent, not only surplus, but the entire property of the company. Being extraordinary, they must, according to the rule of the Lang Case, be apportioned where there has been a surplus accumulated before testator's death. [7] I think, in the absence of fraud, or some very special circumstance, the apportionment should be made on the basis of the company's accounts. To apportion them according to the judgment of an expert or of the court, as to whether the various items of disbursement are chargeable to current or capital, would be practically impossible. Proof on the one side would necessitate proof on the other. Even if the court, in the case of a foreign corporation, had power to compel exhibition of a multitude of items, stretching perhaps over a series of years, the length of time required for the examination, the expense of it, the doubt, after all, whether items (e. g., relating to the cost of new bridges, new rails, new machinery, new equipment) were properly chargeable to one account or the other, or, if to both, in what proportion, would of themselves be prohibitive of the inquiry. I have discussed another phase of the question of stock dividends in Day v. Faulks, 81 Atl. 354, in an opinion filed contemporaneously with this. What I said in that case may, to a certain extent, apply here. For the reasons already given, the extraordinary cash dividend of 50 per cent. paid by the Delaware, Lackawanna & Western Railroad Company must also be apportioned. [8] The option to subscribe to shares of [8] The option to subscribe to shares of the coal company is evidently capital. It was the right to purchase on favorable terms a new thing. If an option to subscribe to new stock of a corporation, whose stock the new stock of a corporation, whose stock the trustees hold, is capital, so, a fortiori, is an option to purchase stock they do not hold. (79 N. J. E. 113) LEYDEN v. LAWRENCE et al. [Ed. Note. For other cases, see Insurance, Cent. Dig. 8 1447; Dec. Dig. § 581.*] 3. INSURANCE (§ 606*) - PARTIAL SATISFACTION-PROCEEDS OF INSURANCE LOSS-SUB ROGATION. Where an insurance clause in a mortgage gave the mortgagee the option to take out insurance at the expense of the mortgagor, but did not compel him to do so, the mortgagee was at liberty to insure at his own expense and solely for his own benefit; and, in the absence of proof that the insurance effected was for the joint benefit of the mortgagor and mortgagee, or at the mortgagor's expense, except the fact that amount due on the mortgage, it could not be the insurance, in amount, was in excess of the held that the mortgagor was entitled to have the amount of the loss credited on the mortgage; and hence the insurer, having paid such loss, was entitled to be subrogated to the rights of the mortgagee. [Ed. Note.-For other cases, see Insurance, Cent. Dig. §§ 1504-1511, 1514-1516; Dec. Dig. $ 606.*] Action by James J. Leyden against Elijah W. Lawrence and others. Decree for complainant. See, also, 79 Atl. 615. French & Richards, for complainant. A. H. Swackhammer, for defendants. ing touching the sufficiency of a plea which had been filed by complainant to the crossbill of defendant, I held as follows: "It is estate has an insurable interest therein, and settled in this state that a mortgagee of real when such mortgagee, at his own expense and solely in his own behalf, procures insurance on the mortgaged property for the better security of his debt, the insurer, if obliged to pay a loss occasioned by injury to such property, may be subrogated pro tanto to the rights of the mortgagee under the mortgage. Sussex County Mutual Insurance Co. v. Woodruff, 26 N. J. Law, 541; Nelson v. Bound Brook Insurance Co., 43 N. J. Eq. 256 [11 Atl. 681, 3 Am. St. Rep. 308]; Lawrence v. Union Insurance Co. (Sup.) 76 Atl. 1053. It may be said to be equally well settled that if the insurance has been taken by the mort LEAMING, V. C. [1, 2] At a former hear (Court of Chancery of New Jersey. Sept. 18, gagee at the expense and for the benefit of the 1911.) mortgagor, as well as for his own protection, 1. INSURANCE (§ 606*) - INTEREST OF MORT- the mortgagor will have the right, in case of GAGEE SUBROGATION. a loss, to have the avails of the policy ap A mortgagee of real estate has an insur-plied for his benefit toward the discharge of able interest therein, and when he insures the his indebtedness. Pearman v. Gould, 42 N. property at his own expense and solely for his own benefit, the insurer, if obliged to pay a loss J. Eq. 4 [5 Atl. 811]." I further held at that occasioned by injury to the property, may be time that with the fact established by the *For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key No. Series & Rep'r Indexes |