12 N.J. Eq. 13 | New York Court of Chancery | 1858
William W. Fleming and Daniel S. Miller, jun., were seized in fee simple, equally, as tenants in common, of several large and valuable tracts of land, situate in tbe counties of Burlington, Camden, and Atlantic, and generally known and designated as the “ Atsion estate."
On the eighth of August, eighteen hundred and fifty-four, William W. Fleming executed to his father, Thomas Fleming, then residing in the city of Philadelphia, a bond, in the penal sum of two hundred thousand dollars, conditioned for the payment of one hundred thousand dollars, in two years from the date thereof, with interest thereon, in quarterly payments; and to secure the payment of the said bond, according to its condition, the said William W. Fleming and his wife executed to the said Thomas Fleming a mortgage upon the “ Atsion estate.”
After the execution and recording of this mortgage, and on the eleventh of September, eighteen hundred and fifty-four, William W. Fleming made a general assignment, for the benefit of his creditors, to the complainants in this suit, by virtue of, which his interest and title in the “ Atsion estate” became vested in the complainants, as his assignees.
Immediately after the assignment, Thomas Fleming
Since then Thomas Fleming has deceased, leaving a will, bearing date the fifteenth of February, eighteen hundred and fifty-five, which was after the presentation of his claims, as aforesaid, to the assignees. By his will, he gives some directions to his executors in reference to the prosecution of the claims so presented.
There are three questions involved in this suit. These arise between the complainants, as assignees of William W. Fleming, and the executor of the will of Thomas Fleming, who has taken out letters testamentary in this state.
The_/írs¿ question is as to the validity of the mortgage; second, as to the construction of the will of Thomas Fleming, whether it operates as a release of the mortgage; third, the effect upon the mortgage security, resulting from the fact of proof of the debt under the assignment.
It is insisted that the mortgage is invalid, because it was given, in part, to secure future advances. The broad ground is taken, that a mortgage for future advances is not valid in this state. At the time of the execution of the mortgage, there was a debt due from William to Thomas Fleming, for money advanced, of $38,894.61. The mortgage was executed to secure that debt, and such further advances as Thomas Fleming might make to his son, not exceeding the amount mentioned in the bond and mortgage. Between the date of the mortgage, which was the eighth of August, 1854, and the date of the deed of assignment, which was the 11th of September, 1854,
It has been repeatedly decided that a mortgage to secure future advances is a valid 'security, as against subsequent encumbrances, for all advances made up to the time when such encumbrances intervene. "Whether it will secure advances to the time only when the subsequent encumbrance was actually executed, or to the time of the actual notice of such future encumbrance, may be deemed not altogether a settled question. The authorities are numerous, and are very decided and uniform in reference to the validity of such mortgages, as against a subsequent hen for all advances prior to such liens being acquired. Shirras and others v. Caig and Mitchell, 7 Cranch 50; Brinkerhoff v. Marvin, 5 J. C. R. 327; Livingston v. McInlay, 16 Johns. Rep. 165; The Bank of Utica v. Finch, 3 Barb. C. R. 298, 303; Leeds et al. v. Cameron, 3 Sumner's Rep. 488; Gardner v. Weber, 17 Pick. 407; Com. Bank v. Cunningham, 24 Pick. 274. In looking at these authorities, it will be seen that none of the objections which counsel, in the argument of this case, urged against the validity of such a mortgage has failed to receive the due consideration of the courts. It was insisted, as an objection to its validity, that this mortgage was false on its face; that while it purports to be a security for a debt of $100,000, actually due, the debt really existing was but little over one-third of that amount. In Shirras and others v. Caig and Mitchell, it was part of the ai’gument of counsel, that the mortgage untruly recited the whole transaction, and that the mortgage was made only to cover future contingent responsibilities. Ch. J. Marshall, in his opinion, says, “It is true the real transaction does.
A further objection was started — that such a mortgage contravenes our registry law’s, and defeats their main purpose ; that instead of the record being a notice to subsequent purchasers and creditors of the real transaction, it holds out a false light to misguide and embarrass them. But although the statute requires that the registry must contain the amount of the mortgage, and when payable, the registry is not intended as notice of the amount which is actually due upon the mortgage. A mortgage may be half paid a week after it is executed, and so only half the amount be due upon it as it stands upon the record. It may be a mortgage of long standing with a large accumulation of interest upon it, so that the amount due upon it is very much larger than appears from the record. Neither the mortgagor nor the mortgagee is bound to keep the record accurate as to the amount due upon the mortgage. If it had been intended that the amount appearing upon the record should be conclusive between the parties, and if the object of recording the amount was that purchasers and creditors might rely upon the record as to the amount actually due between the parties, then the statute is very imperfect in its provisions for accomplishing such an object. But this was not the object. It was simply to give to parties interested such notice as would lead them to proper inquiries, and
Where there are so many authorities sustaining the validity of mortgages precisely similar, as to the particular wre have been considering, to the one in controversy in this suit, and as no case has been produced which questions even the correctness of those authorities, it could scarcely be expected that this court, without any new light shed upon the subject, 'would make a decision opposed to the principles which they have established.
But this question is not a new one in this court. It was very elaborately argued in the case of Robinson et al. v. Urquhart et al., decided at the last term, and a similar mortgage was sustained. Several terms since, in a case not yet reported (the name of which I cannot now recall), the same question was argued and decided, and the mortgage was declared valid. I took occasion, in my opinion in the case last referred to, to suggest the propriety and safety of always stating in the mortgage the real character of the transaction. If the transaction is a fair one, there can be no objection to state it as it really exists. By stating it otherwise, it renders the security a suspicious one. It would require very little, in addition to this circumstance, to induce the court to postpone such a mortgage to a creditor or bona fide purchaser.
This case, however, is relieved from any suspicion of
The next question is as to the construction of the will of Thomas Fleming, and how it affects this mortgage. By the ninth clause of his will, the testator declares as follows:
“ 9. In order to place my children as nearly upon an equality as may be, I direct that all the debts with which my sons are respectively charged upon my leger shall be deducted from their respective shares of my estate, allowing to each of them a credit of twenty-five thousand dollars, being the sum I have advanced or given hereby to their sisters, excepting always my son William W. Fleming, against whom I desire my executors to prosecute no suit or claim for any debts he may owe -me; but not to abandon the proceedings commenced against the estate assigned by him to Messrs. Bell and Markley for the benefit of his creditors.”
Without the last member of the clause of the will I have recited, there can be no doubt it would have operated as an equitable release of the mortgage. If the direction to the executors, to prosecute no suit or claim against William, for any debts he might owe the testator, was without any qualification, the fair and legitimate construction would be, that it was the testator’s intention to forgive William all debts that he owed him. To have enforced this mortgage upon the ground, that it was a proceeding in rent, and not in personam,, and that collecting the debt out of William’s property was not prosecut
What is the effect upon the direction to his executors, “ to prosecute no suit or claim for any debts he may owe me,” or the qualification annexed to such direction, Ubut not to abandon the proceedings commenced against the estate assigned by Mm to Messrs. Bell and Marhley for the benefit of Ms creditors?” This qualification amounts toa positive direction to his executors to prosecute the proceedings already commenced by the testator against the estate assigned to Bell and Markley. A part of the estate assigned was the mortgaged estate. If, then, the proceedings the testator had already commenced against that estate were for the purpose of subjecting it to the payment of the mortgaged debt, it appears to me that the faithful prosecution of those proceedings by the executors involves the obligation, on their part, to conduct that prosecution in such a manner as to make most out of the estate.
But it was insisted, by counsel, that the testator having proved his mortgage debt under the assignment, the legitimate fruit of such proceeding is a dividend upon his debt; that when those dividends should be received by the executors, there would be an end to the proceedings referred to by the testator, and that the executors could accomplish nothing more without instituting other proceedings, which could, in no proper sense, be regarded as the “proceedings commenced against the estate” mentioned by the testator in his will. It is a very dangerous mode of testing the intention of a testator by so ingenious and technical an argument. A testator has, very frequently, in this way been argued into and out of his real intention. But admitting the premises, that the
But looking for the intention of the testator in a broader and more liberal view of the whole matter — taking the language of the will in eonnnection with all the facts relating to the subject matter we are considering— it appears to me to be a very forced construction to put upon the will, that the testator meant to release the estate from the mortgage. His son was insolvent; and the reason is plain enough why he released him from all personal liability of his indebtedness. But he had good security for part of his debt. To release that was no bene-' fit to his son, but was taking just that amount out of his
It was attempted to draw an inference in favor of the testator’s intention to release the mortgage, from the disposition manifested by Mm through the whole will, and particularly in the clause recited, to make an equal disposition of his property among his children. It is insisted, if this mortgage is enforced, then William will not get, in the division of the estate, an equal share with his brothers and sisters. Laying out of view the fact, that it by no means appears, after a very nice calculation, that by releasing the mortgage, it will make William’s portion any nearer equal with that of the testator’s other children than it will be by enforcing it, it is very evident that no inference, whatever, of intention can, with any propriety, be drawn from the consideration referred to. William had assigned all his property for the equal benefit of his creditors. His debts amounted to upwards of six hundred and sixty thousand dollars. A release of the mortgage could not benefit the son personally. He would be released from his debts, as to those creditors who should come in under the assignment, whether the mortgaged estate was, or was not, thrown into the common fund. It is a most violent presumption under such circumstances, to be derived from the fact of an intention on the part of the testator to make any equal distribution of his property among his children, that rather than disturb this equality, he would prefer the creditors of William over his other children, although, by his doing so, his son could derive no possible advantage from such preference. If the testator had intended to release the mortgage, from motives of justice and morality so uncommon among men, he would have said so plainly, and
The only question remaining is, as to the effect of the testator’s proving his mortgaged debt under the assignment. It is insisted that, by proving his debt, he abandoned his mortgage security, and that all he can claim, after having proved his whole debt, is to come in with the other creditors for a dividend upon it. "What are the rights of a mortgage creditor under the assignment, and to what dividend, if any, is he entitled upon his debt ?
The act puts all creditors upon an equal footing. They are to present their claims to the assignee, under oath or affirmation, within three months after the assignment. The assignee, or any creditor or other person interested, may file exceptions to the claim of any creditor. These are disposed of in the manner prescribed by the act. The assignee is then to “ proceed to make, from time to time, fair and equal dividends among said creditors of the assets which shall come to hand, in proportion to their claims.” This is all that is said in the act as to the manner in which the dividends shall be made. There is nothing said as to mortgage creditors, except in the first and thirteenth sections of the act, where they are recognised as preferred creditors to the extent of their liens. The first section declares, that every assignment shall be for the equal benefit of creditors, and that all preferences of one creditor over another, or whereby one or more shall be first paid, or have a greater proportion in respect of his, her, or their claim than another, shall be deemed fraudulent and void, excepting judgment and mortgage creditors, when the judgment has'not been by confession for the purpose of preferring creditors. The thirteenth section gives full power and authority to the assignee to refer to arbitration, settle and compound, and to agree with any person touching all matters belonging or appertaining to the estate, and to redeem all mortgages and conditional contracts.
In this case, the testator made out his account against the debtor. It was for money lent and advanced, and money paid in different sums, from time to time, from July 1st, 1854, to September 11th, 1854. The whole amount was §182,195.76. At the foot of the account was this memorandum : “ N. B. Of the above sum one hundred thousand dollars is secured by a mortgage on real estate in New Jersey, given by the said William W. Fleming to the said Thomas Fleming, dated the 8th day of August, A. D. 1854, recorded in Burlington, Camden, and Atlantic counties, New Jersey.” To this is annexed the affidavit of the testator, in which he swears that the debtor is justly indebted to him in the sum stated in the account, and which concludes as follows: “ for which sum of 182,195.76 dollars this deponent hath a just claim against the estate of the said William W. Fleming, of which §100,000 is secured by a mortgage also, as before stated.”
“ Exceptions were filed to the account, which have undergone the investigation prescribed by the statute. It is agreed by the parties, by an agreement filed in this suit, that there is due upon the mortgage §59,297.50.
It is insisted, on the part of the assignees, that, by this mode of proof, the testator relinquished his security, and that he is barred from all benefit of his mortgage by virtue of the fourteenth section of the act, which declares, that “ with respect to the creditors who shall come in under said assignment, and exhibit their demands, as aforesaid, for a dividend, they shall be wholly barred from having afterwards any action or suit at law or equity against such debtors or their representatives.” It is insisted that the mortgage cannot be enforced, except by a suit at law or equity, against the assignees, as the representatives of the debtor, and that such suit, after proof of the debt, is barred by the statute.
The act declares, that if any creditor shall not exhibit his claim within three months after the date of the assignment, such claim shall be barred of a dividend. This mortgage creditor was obliged to present his claim within three months. It was,,therefore, out of his power to prove so much of his debt only as might be due him after exhausting his security. There was no way for him to subject the mortgaged estate to the payment of his debt, except by a bill in this court, and such proceeding could not have been brought to maturity within the time limited by the statute for proof of his claim. There was no alternative left him but to prove his debt as it really existed. He waited until within a day or two of the expiration of the three months, and then proved his claim, reserving, in the forms of his proof, the benefit of his mortgage. This was -the object, and it was the legal effect of the memorandum at the foot of the account, and the statement in the affidavit as to the character and extent of-his mortgage. The claim he made was for all his legal and equitable rights under the assignment. It cannot be that, having made his claim in the only mode by which he could secure to himself his rights under the assignment, he has thereby forfeited any of those rights. No court would ever put such construction upon the act; and yet such is the inevitable result, if the construction contended for on behalf of the complainants is adopted.
There were some cases in bankruptcy referred to, and among others that of ex parte Downes, 18 Ves. 290, which was the case of mortgagee, who, electing to give up his mortgage, was admitted to prove, under a commission of bankruptcy, against the mortgagor. Finding the estate
This question has received some consideration from our own courts. In the case of Vanderveer v. Conover et al., before referred to, the question was not directly involved in the decision of the cause. The Chief Justice, however, in reviewing the operation and provisions of the statute, says, “If a judgment creditor, apprehending that the property actually bound by his judgment or execution may not be sufficient to satisfy him, thinks proper to come in under the assignment, he has a right to do so.
There is some embarrassment in adjusting the claim of a mortgage creditor who proves his debt. The mortgaged premises must necessarily be disposed of before it can be ascertained to what dividend the creditor is entitled. Unlike the bankrupt law, and the proceedings under it. in this respect, the act makes no provision for the sale or disposition of any such securities. The pledge can only be sold by a bill in this court. The assignees cannot compel the creditor to file such bill. They may refuse to give him a dividend until he does; but such refusal will operate to the delay and prejudice of the other creditors. The assignees have the power, and it is their duty, so to dispose of the property, real and personal, of the debtor as will be most advantageous for the creditors generally. They may compound with the mortgage creditor by fixing a value upon the security. If no compromise can be made, there is no difficulty in the assignees filing their bill, and obtaining such decree as will secure the interest of all parties.
I am of opinion that the mortgage is a valid one; that it is not released by the will of Thomas Eleming; and that, as a security, it was not impaired by the mortgagor’s proving his mortgage debt under the assignment.