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Building contract cost plus salaries office expense.

1. Under the terms of an agreement, "to receive for its entire compensation for its services in so doing (i. e., building) a sum equal to 10 per Icent of the entire cost of such building," a corporation is not entitled to receive for its services, in addition to the 10 per cent called for by the terms of the contract, a proportion of the salaries of its officers and office employees, while supervising the construction of the building; nor 10 per cent on the cost of financing the building when the disbursements in connection therewith have been allowed; nor for telephone calls, carfare, postage, stationery,-they are office charges of the defendant corporation; nor tools used in the construction of the building,—they are part of the equipment of a contractor.

[See note on this question beginning on page 126.]

Equity complete justice.

2. It is not an inflexible rule that, when the court of chancery has once acquired jurisdiction for one purpose, it is bound to retain the case for complete relief; whether the court of chancery will do so, so as to include all the points in controversy between the parties, rests somewhat in the discretion of the chancellor. The rule applied in this case, where the court of Headnotes by BLACK, J.

chancery, under an agreement, having jurisdiction to make an accounting excluded therefrom items under two former agreements which were cognizable in a court of law, held, proper. Mortgage lease compensation of mortgagee.

3. A mortgagee in possession is not entitled to compensation for services rendered for renting the premises,in this case, an apartment house.

(Garrison and Trenchard, JJ., dissent.)

APPEAL by defendant from a decree of the Chancery Court in favor of complainant in an action for an accounting and reconveyance of lands held by defendant, and for a receiver to collect rents pending litigation. Affirmed.

The facts are stated in the opinion of the court.

(88 N. J. Eq. 353, 102 Atl. 151.) Messrs. Collins & Corbin, and Edward A. Markley, for appellant:

The scope of the accounting should not have been confined to the agreement of February 26, 1913, but should have included therein the transactions between the complainant and defendant prior thereto, which led up to, related to, and were closely connected with said agreement.

Couse v. Boyles, 4 N. J. Eq. 212, 38 Am. Dec. 514; Ames v. New Jersey Franklinite Co. 12 N. J. Eq. 66, 72 Am. Dec. 385, 10 Mor. Min. Rep. 434; Bullock v. Adams, 20 N. J. Eq. 367; Youmans v. Youmans, 26 N. J. Eq. 149; Trotter v. Heckscher, 42 N. J. Eq. 254, 7 Atl. 650; Melick v. Cross, 62 N. J. Eq. 546, 51 Atl. 16.

Defendant should not have been regarded as a mortgagee in possession to the extent of disallowing it any compensation for services rendered to complainant under authorization of June 24, 1913, after November 1, 1913.

2 Jones, Mortg. § 1132; Davis v. Dendy, 3 Madd. Ch. 170, 56 Eng. Reprint, 473, 18 Revised Rep. 209; Harper v. Ely, 70 Ill. 581; Green v. Lamb, 24 Hun, 87; Gibson v. Crehore, 5 Pick. 145; Tucker v. Buffum, 16 Pick. 46; Gerrish v. Black, 104 Mass. 400; Montague v. Boston & A. R. Co. 124 Mass. 242.

Mr. William A. Lewis also for appellant.

Messrs. Hartshorne, Insley, & Leake and William E. Decker for respondent.

Black, J., delivered the opinion of the court:

The fundamental question in this case is one of equitable jurisdiction. The litigation grows out of an agreement made between the parties to this suit, on the 26th day of February, 1913. The complainant, being seized of lands at the corner of Highland avenue and the boulevard in Jersey City, New Jersey, entered into an agreement on the above date, with the defendant, to erect an apartment house on a part thereof. Under the terms of the agreement the complainant conveyed the lands to the defendant, and also gave the defendant certain moneys, the lands to be reconveyed to her on completion of the building and payment thereof, the cost to be ascertained by an accounting to be made by the defendant. The de

fendant, having erected and completed the apartment house on part of the land, sold and mortgaged other parts in accordance with the terms of the agreement, retained title to the remainder, and collected rents from apartments when rented. The defendant having failed to render a just and true account, the complainant exhibited her bill of complaint in the court below, and prayed: (a) For an accounting; (b) a reconveyance of the lands held by the defendant; (c) a receiver to collect the rents pending the litigation. The case was brought to trial before Advisory Master Charles J. Roe, resulting in a decree for the complainant, and the sum of five thousand five hundred and forty dollars and thirtyfive cents ($5,540.35) to be paid by the defendant to the complainant; hence, the defendant brings this appeal, alleging seven specifications as grounds of appeal.

The first and only one that requires any extended discussion relates to the ruling of the advisory master, which limited the scope of the accounting to the agreement of February 26, 1913. The appellant urges that the master should have included the transactions between the complainant and the defendant, under two prior written agreements, viz., August 27 and Noveming generally, to the same subject, ber 22, 1912. They referred, speakviz., that of building. They were both abandoned, no work being done under them, except the preparing of plans for a building under the agreement of August 27, 1912, and the payment of five hundred and forty dollars ($540) to the appellant. The accounting was a long and laborious one, involving something over $100,000. The record is also voluminous. The clause in the agreement of February 26, 1913, providing for the conveyance of the property and the holding of it by the defendant, until it should be paid, is the distinguishing feature between that agreement and the two preceding agreements referred to

above. That clause is the sole ground for the special equity, which gives the court of chancery jurisdiction over this cause. The question then is, Did the master err in limiting the scope of the accounting as above indicated? One other fact is urged, as having some significance, which may be mentioned; that is, the parties stipulated before the master, authorizing him to consider all the matters in dispute and adjudicate thereon (and waiving a jury trial on any such matters, in the brief); but it may be said, in passing, that such a stipulation imposes no obligation on the court of chancery to decide those issues.

It may be conceded that a court of chancery having once acquired jurisdiction of a cause, will do all in its power to settle all the rights of all the parties, in the matter of any controversy; but this is not an inflexible rule which the court of chancery is bound to follow in every case that comes before it.

Equity-complete Justice.

The rule to be applied was succinctly stated by Vice Chancellor Reed, in the case of Stout v. Phoenix Assur. Co. 65 N. J. Eq. 573, 56 Atl. 694, in these words: "A court of equity in this state can deal with legal questions, only so far as their decision is incidental or essential to the determination of some equitable question. Merely because a court of equity has acquired jurisdiction for one purpose, it is not empowered to retain the case for complete relief."

Chief Justice Beasley, speaking for this court said: "It is not true, by any means, that, when a court of conscience has acquired cognizance for one purpose, it thereby acquires cognizance over the entire controversy for all purposes." Lodor v. McGovern, 48 N. J. Eq. 279, 27 Am. St. Rep. 446, 22 Atl. 200.

The principle is further illustrated in our courts, in the cases of Little v. Cooper, 10 N. J. Eq. 273; Red Jacket Tribe v. Hoff, 33 N. J. Eq. 441. The subject is discussed, the

principle illustrated and applied, in many cases, and by text-writers, such as 1 Story, Eq. Jur. ¶ 72; Pom. Eq. Jur. ¶ 181; 10 R. C. L. p. 374, ¶ 123.

The extending of the jurisdiction of chancery so as to include all the points in controversy rests somewhat in the discretion of the chancellor; especially so, where the rights involved grow out of other contracts. In this case the defendant has an adequate and complete remedy at law for all the items involved under the two former contracts, including damages for their alleged breach. The court of chancery cannot retain jurisdiction for the purpose of granting a purely legal remedy, or to try a claim for unliquidated damages. Trotter v. Heckscher, 40 N. J. Eq. 657, 4 Atl. 83; Phillips v. Pullen, 45 N. J. Eq.

157, 16 Atl. 915.

The bill of complaint in this suit was filed April 22, 1915. The present Chancery Act (Pamph. Laws 1915, p. 184, 8), by which a jury trial shall be deemed to be waived, unless demanded in the pleadings, does not apply to this case. Id. ¶ 12. We therefore think that the master was right in confining the scope of February 26, 1913. the accounting to the agreement of

It is next urged that the defendant should not have been regarded as a mortgagee in possession, to the extent of disallowing it any compensation for services rendered to complainant, for renting the apartments under the authorization contained in a letter, dated June 26, 1913, after November 1,

Mortgage-lease -compensation of mortgagee.

1913. It is sufficient that the ruling of to say on this point the master is amply sustained by the authorities. Clark v. Smith, 1 N. J. Eq. 137; Elmer v. Loper, 25 N. J. Eq. 482; Venderhaise v. Hugues, 13 N. J. Eq. 410; Moore v. Cable, 1 Johns. Ch. 388; 2 Jones, Mortg. 1 1114.

The third point is without legal merit; it requires no discussion.

The next three points involve a

(88 N. J. Eq. 333, 102 Atl. 151.)

construction of the clause in the contract, which provides that the defendant is "to receive for its entire compensation for its services in so doing [i. e., building] a sum equal to 10 per cent of the entire cost of such building, and to complete the same by October 1, 1913;" that the entire cost of the building, including the 10 per cent compensation, shall not exceed forty-two thousand dollars ($42,000). The master allowed the defendant the sum of three thousand four hundred and seventy dollars and fifty cents ($3,470.50) 10 per cent on the cost of the building, for its services in constructing the building, under this clause in the contract.

The appellant now claims that, in addition thereto, the master should have allowed a proportion of the salaries paid by the defendant to its officers and office employees, to its president, Mr. Beaumont, at the rate of nineteen dollars and twenty cents ($19.20) per day, to its secretary Mr. Rowan, at the rate of thirty-five dollars ($35) per week; to its messenger, or office boy, Mr. Stanley, at the rate of eighteen dollars ($18) per week, while supervising or superintending the construction of the building. Also it is contended by the appellant that the master should have allowed 10 per cent for services performed, on the cost of financing the apartment house, amounting to nine hundred ($900). But disbursements in connection with the mortgage loans and sales of land were allowed by the master; also the appellant claims. items for telephone calls, carfare, postage, and stationery; tools, such as ladders, mortar tubs, etc., used in the constructing of the building. Without stating in detail the entire contract under which the appellant claims such items, it is sufficient to say that we think the master properly construed the contract, and made a correct application of its terms to the items in controversy in this case, by excluding all these various items above indicated as not

being included within the provisions of the contract.

The reasoning of the master is quite satisfactory in the memorandum filed by him in the court below, excluding these various items. The contract provides for no independent supervision. The defendant cannot charge the complainant with a proportion of the salaries that it pays its officers for supervising or superintending the building. The defendant is the contracting party; it had a right to employ whomsoever it chose to superintend the building on its part, the work of the laborers employed by it. So, with the other items enumerated above, such as telephone calls, not allowed by the master, they were office charges of the defendant corporation; they tract-cost plus were not costs and salaries-office

expenses of the

Building con

expenses.

building. So, the tools used in the construction of the building, they were a part of the equipment of the contractor; a contractor, when he agrees to build, must, in the absence of a contrary agreement, furnish all the tools and necessary appliances for the work contracted to be done.

Objection is also made to an allowance of a counsel fee of fifteen hundred dollars ($1,500) to the complainant. Pamph. Laws 1910, p. 427, permits the allowance of a counsel fee by the chancellor of such amount as shall seem to him reasonable and proper. After examining the record in this case, which is voluminous, involving a large sum of money, we cannot say that a counsel fee of such an amount was either improper or unreasonable.

The decree of the Court of Chancery is affirmed, with costs.

Garrison and Trenchard, JJ., dis

sent.

Bergen, J., concurring with modifications:

The complainant, by a letter dated June 24, 1913, addressed to the defendant, authorized it "to run all apartments, making such arrange

ments as in your judgment may seem advisable. Also such other arrangements as may be necessary in connection with the furnishing and running of apartments, such cost as may be incurred thereby to be added to the contract allowance."

This separate agreement manifestly authorized the defendants to find tenants and to furnish the apartments, the cost of which was made subject to the 10 per cent allowance. The word "cost" must refer to the furnishings and expenses of running the apartments. The master allowed the cost of painting, janitor's wages, coal and gas, nine refrigerators, and window shades, but eliminated all cost which arose subsequent to the 1st day of November, 1913, when he said the building was completed, and that thereafter the defendant was not entitled to 10 per cent on any furnishings or expenditures, upon the ground that, the building being completed, the defendant was a mortgagee in possession. If it be granted that the defendant was a mortgagee in possession, it was nevertheless entitled to continue its account until the property was turned over, and could

not be deprived of the benefit of the written contract that it was to be paid 10 per cent upon the cost of the furnishings. It is impossible to tell from this account what proportion of the furnishings were allowed; none appear in this account except the refrigerators at $197; and the window shades at $178, whereas the total cost of the furnishings was $1,746.08. These furnishings were not a part of the original contract, and it would make no difference whether they were furnished after the completion of the building, or before; they were to be paid for with the addition of 10 per cent on their cost; and I do not see upon what theory we can take a part of such furnishings and include them in this account, and exclude the balance, to be a subject of future litigation.

I think that either the subjectmatter of this latter contract should be wholly eliminated, with the statement that it is not to be included in the decree, or the whole amount should be included, and therefore the decree should be modified to this extent. I vote to affirm with this modification.

ANNOTATION.

Construction of "cost plus" contracts.

While no cases have yet been reported involving the construction of the so-called "cost plus" contracts which have been entered into on behalf of the government, in connection with the prosecution of the war, a few cases have arisen out of private contracts, providing for compensation on the basis of a percentage of the cost of the work done, and involving their construction as to what elements, or items, may be taken into consideration in determining the cost of the work, upon which the percentage compensation of the contractors is to be figured.

In accord with the reported case

(SHAW V. G. B. BEAUMONT Co. ante, 122), as to the right to charge for the general expenses of the contracting firm is Isaacs v. Reeve (1899) - N. J. Eq. 44 Atl. 1, holding that the contractor should not be allowed to charge a sum for the mere supervisory attendance of one of the contractors, who did not do any actual work, in addition to the 10 per cent, as that was what the 10 per cent was for.

And in Savannah, A. & N. R. Co. v. Oliver (1909) 98 C. C. A. 174, 174 Fed. 140, where a contractor was to receive the actual cost of the work and labor performed, and materials and supplies furnished, either by himself or sub

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