Boice v. Conover

61 A. 159, 69 N.J. Eq. 580, 3 Robb. 580, 1905 N.J. Ch. LEXIS 101

• Court: New Jersey Court of Chancery
• Decided: June 13, 1905
• Status: Published

Opinion

Emery, Y. 0.

(after statement).

The decree on appeal directing the subrogation of Edwin Alíen to the lien of the judgment settled the right to subrogation as against the parties to the suit, and all persons bound by the decree, but does not itself execute or work out the subrogation, and on the remittitur the cause is now before this court for that purpose. At the timie of filing the original bill, the Mapes company, as judgment creditor, and Cornelius hT. Conover, as judgment debtor, and owner of the lands, subject to the judgment and levy, were the only persons directly interested either in the judgment, or in the mortgaged chattels or land, and if this situation had continued pending the suit and until the remittitur, the subrogation would have been worked out by a decree -(on supplemental bill, if necessary) that upon payment of the judgment by the receiver, the judgment creditor assign the judgment to Edwin Allen for the collection thereby of the amount found due to him by the decree. If the security to which subrogation was to be made were a decree of this court made in the suit, or an equitable lien, like a mortgage, before the court for foreclosure or redemption, then the subrogation might be effected directly by a decree of this court directing the sale of the lands to pay the party entitled to be subrogated. But the judgment is a purely legal lien on lands which wTere not and could not be subject to the direct order or decree of this court in the suit, and the only control over the lands subject to the judgment is by directions as to the legal ownership or control of the judgment. The right to subrogation is not the same as the right to an assignment, but an actual .assignment may be necessary in order to effect subrogation. 3 Pom. Eq. Jur. (3d ed.) 1214 In Hill v. White, 1 N. J. Eq. (Sax.) 435, an assignment of a mortgage was directed for this purpose, while in Bigelow v. Cassedy, 28 N. J. Eq. (11 C. E. Gr.) 557 (Court of Errors and Appeals, 1875), it was held that no assignment was necessary, the lands to be sold being under foreclosure in the suit. In the present case the principle of subrogation has been extended to a new class of cases, viz., cases arising under the Recording acts, where the grantee or mortgagee has failed to comply with these acts, and his property has been subsequently taken by a judgment creditor to pay the debts which the grantor or mortgagor, having conveyed with warranty, was, as between him and his grantee, liable to pay. This principle was applied in a case where the property of the mortgagee was taken by a decree of the court, and the right to subrogation arose by reason of this taking, and all the parties interested (mortgagee, judgment creditor and mortgagor) were before the court in relation to the proceeds of the mortgaged property, and were at the time of the decree apparently the only persons interested. I think the subrogation must be carried out in a case of this kind by considering the mortgagee as equitably entitled, by reason of the decree, to an actual assignment of the judgment, and that the cause on the supplemental bill must be disposed of on his equity to an assignment under tire decree, modified or controlled, so far as the facts -shown by any of the defendants entitle them to any modification of such right to an absolute assignment, either against Edwin Allen or between themselves. Subrogation, being an equitable right or remedy, is applied only with due regard to the legal and equitable rights of others. Gaskill v. Wales, 36 N. J. Eq. (9 Stew.) 527, 533 (Court of Errors and Appeals, 1883). And all persons interested either in the judgment or lands covered by it at the time the subrogation is worked out are entitled to be heard as to their equities, either against the claimant of the right or against their co-defendants subject to the burden. As to the defendant Speyers, as assignee of the judgment and holder of a subsequent mortgage and judgment against Cornelius N. Conover on part of the lands, and as to the defendant Cornelius N. Conover, as the present owner of a portion of the lands levied on under the judgment, there is little difficulty. The assignment to Speyers was received with actual notice of the pendency of the suit, and that one of the objects of the suit, was the marshaling of the securities. Speyers is chargeable in this respect with the knowledge of his attorneys, who were also Cornelius N. Conover’s solicitors in the suit, and his answer shows that the assignment to him was held for the purpose of giving Cornelius N. Conover the benefit of the payment of the judgment from the mortgaged property. If the assignment of the judgment to Speyers could on the facts be considered as a purchase of the judgment as a valid security against Conover, then Speyers5 tenure of it and receipt of the money thereon under the decree was subject to any decree on appeal as to his right to receive the money in the hands of the receiver for the payment of the judgment and the conditions of its receipt. But from the answer- of Speyers and the evidence in the ease, it is clear that the transaction of the assignment, so far as Speyers and the judgment debtor are concerned, -was not intended as a purchase of the judgment by Speyers as an outstanding security against Cornelius F. Conover, but was a payment of the judgment by his own money, raised by a mortgage on his lands, to Speyers, which was to be reimbursed to .the • debtor by means of the assignment, which, kept the judgment alive 'for that purpose. Mr. Booraem, who acted for Conover, says Conover paid the judgment with his own money, which he borrowed from Speyers; ' that the judgment was assigned so that they could get out of it all they could for Conover and Mrs. Boice, and that so far as Speyers5 mortgage was concerned, their only interest for him was to see that his interests were properly protected by the custody of the assignment of the judgment, and that the money received from-the receiver was not to go to Speyers, but to Conover, as it belonged to him. This transaction is substantially a payment of the judgment debtor himself, and such payment, by the settled law of this state, discharges the judgment as against the judgment debtor and those who held interests in his' lands subject to the judgment, and the judgment as to them cannot be kept alive by assignment. Traphagen v. Lyons, 38 N. J. Eq. (11 Stew.) 613, 616 (Court of Errors and Appeals, 1884), cites the cases from Bolles v. Wade, 4 N. J. Eq. (3 Gr.) 459 (Chancellor Haines, 1844). And the assignee of the judgment, even if a bona fide purchaser, takes subject to this defence of payment by the judgment debtor in favor of persons interested in the lands. Traphagen v. Lyons, supra, p. 618. A fortiori it must be subject to this defence if assigned and held for the benefit of the judgment debtor. The fact that the Mkpes company did not know the money paid on the assignment was the debtor’s money, and that it made the assignment as on a purchase by Speyers with his money, cannot prevent the effect of the payment of the judgment by the debtor’s money, for neither 'the judgment creditor nor debtor can revive or keep the judgment in force against those who have acquired rights in the lands intermediate the judgment and the assignment. Traphagen v. Lyons, supra, p. 617. This pa3'ment also discharged the judgment so far as it was a lien oar the proceeds of sale in the hands of tire receiver, aird had the agreement for such payment been disclosed before the decree, or to the court on appeal, Edwiir Allen, as mortgagee, would have been entitled to the fund in court, which was subsequently directed to be paid oir the judgment. The decree directed that the money paid to the Mapes, &c., company should be paid in satisfaction of the judgnreirt, and by keeping the judgment apparently alive by the assignment, Speyers, as assignee of the Mapes company, received the money as on a judgment still due from Conover as well as Allen, and in satisfaction of that judgment so far as the money extended. Having thus received the proceeds of sale under the decree unconditionally, and for the purpose of satisfying or paying-tire judgment as an outstanding valid lien, the judgment, as between ’ Speyers and Conover, is to be considered as still alive and its lien restored for the purpose of payment. Spe3rers is estopped from denying that it was so received, and in any aspect of the case, whether considered as a purchaser of an outstanding judgment or as receiving the proceeds of sale representing to be valid a judgment already paid by the judgment debtor, he must now perform the conditions imposed by the court of appeals, under penalty of compensating the defendant Edwin Allen, for whose benefit the conditions were imposed, if they cannot be complied with. The judgment being still uncanceled of record, it may, so far as Speyers and Cornelius N. Conover are concerned, be, in Edwin Allen’s favor, declared as outstanding, and a lien on the lands still owned by Conover prior to the mortgage of Speyers, and the warrant and satisfaction piece, so far as they are concerned, will be declared void and the use of it enjoined. As to the judgment against Cornelius N. Conover obtained by George D. Nevins, administrator of Mrs. Boice, subsequent to the decision on appeal, the judgment of the Mapes company must also be considered a valid prior lien on the lands owned by Conover. Not only was the administrator an actual party to the suit on appeal after Mrs. Boice’s death, but Mrs. Boice received from Cornelius N. Conover, the judgment debtor, the proceeds of sale, which wore paid over by the receiver as on a valid outstanding judgment. The attorneys for Speyers and Cornelius N. Conover were also her attorneys in this transaction, and she is chargeable with notice of the source of the money paid to her and of tire circumstances of its receipt by Cornelius N. Conover. Por this reason, therefore, and also because they were actual parties to the suit, the subsequent judgment cannot be set up to defeat the right of subrogation given by the decree on appeal.

As to David A. Conover, the other tenant in common, and the defendants holding title under him to the lands partitioned by the voluntary deeds in December, 1895, the judgment, however, must be considered as paid by the judgment debtor at the time of the assignment, and their lands, under the rule in Traphagen v. Lyons, supra, were ipso facto relieved by the payment. This is the undoubted right of these claimants under David A. Conover, so far as relates to Speyers and Cornelius N. Gonover. Neither of these persons could .¡enforce the judgment against them, for two reasons—first, because the judgment was paid by the judgment debtor and the assignment in Speyers’ name was held for Conover’s benefit; second, because both of them accepted the partition and claim lands under it. Neither of them, therefore, could repudiate the partition. As to these owners, therefore, the question is whether Edwin Allen, as subrogated in equity to the judgment, and notwithstanding its payment by the assignment, is entitled to enforce it as still an existing lien on the lands convej'ed to David A. Conover in the partition in the lands or the subsequent purchasers from him. Two of these purchasers—Mrs. MacLaughlin and Mrs. Parker—bought their lands expressly relying on the satisfaction piece, and on the statement that the judgment was paid so far as Cornelius N. Conover and his lands were concerned. These two were purchasers after Metlar, and as between Metlar and them their lands were first -liable. Edwin Allen claims that as to all of these purchasers he is entitled to enforce the judgment as still an outstanding lien, because all of their titles were taken pendente lile, and with notice of his ultimate equity in the judgment as affecting the lands, as it might be established by the decree in the suit. No Us pendens was filed and in the-cross-bill actual notice of the suit was alleged. As to none of these defendants claiming under David A. Conover has actual notice of the suit been proved, and as to the defendant Metlar it has been disproved. In my judgment the suit and the cross-bill, even if brought to the actual notice of every purchaser under David A. Conover, did not affect the legal and equitable right of these purchasers to the benefit of the subsequent payment of the judgment by the judgment debtor. The release of their lands followed ipso facto upon the payment, both in law and in equity, and must be sustained, unless they are by acts of their own equitably estopped or prevented from setting up the payment against the equitable assignee of the judgment. Edwin Allen’s suit on his cross-bill, and the mere fact of purchase pendente lite, should not in equity estop or prevent them from having the benefit of the debtor’s discharge of the -judgment— first, because the suit, so far as the judgment was concerned, did not affect or question in any way the right of the judgment debtor to pay the judgment pending suit in relief both of the purchasers pendente lile and Edwin Allen, and the decree finally made in the suit is, if the judgment was in fact discharged by the debtor’s payment of it, now valid and enforceable purely on the ground of the estoppel, which prevents the actual parties to the suit, and those who procured the funds from the receiver to apply them to an existing judgment, from asserting otherwise. This estoppel is purely personal to the parties to the suit and those who procured the funds to give them to the judgment debtor. The subrogation declared by the decree entitled him to the benefit of the lien of the judgment as it existed immediately before the payment to the judgment creditor by the receiver under the decree, and does not operate on the right of the defendants, other than the parties to the suit, to show that at that time the judgment was not a lien on their lands, because it had been paid by the judgment debtor.

Second. The delay in the prosecution of the appeal until three years after the original decree in chancery was fatal to the effect of the suit as notice. Even as against purchasers pendente lite claiming under the parties to the suit a lis pendens is notice only when the suit is prosecuted in good faith, with all reasonable diligence and without unnecessary delay. 2 Pom. Eq. Jur. (3d ed.) § 634. And while a judgment or decree in a lower court against the right claimed does not necessarily and at once terminate the lis pendens, and the notice continues during a reasonable time for an appeal to be taken, yet in order to retain the benefit of lis pendens an appeal must be taken and prosecuted without delay and with such diligence as is required by the circumstances of the case. 2 Pom. Eq. Jur. (3d ed.) § 634, and cases cited in notes, pp. 1071, 1072. Circumstances may render the full limit of the time for appeal an unreasonable delay, and a delay for a less time may be such indication of a waiver or abandonment of appeal as to justify third persons in considering the suit at an end. Such circumstances existed here. The jurisdiction of the court was originally invoked by the complainant and cross-complainant for the realization of a chattel mortgage security and the disposition of its proceeds. The property was taken possession of by a receiver, sold, and the proceeds of sale were in his hands, as an officer of the eouxd, for distribution to the parties entitled. A final decree for distribution was made, denying the right to resort to the lands for the judgment, and was carried out. There was no application for a stay pending appeal nor any notice of appeal. Unless it can be said that it is the duty of the receiver, and therefore his right, to retain the funds for three years to await an appeal, the case was one where any defendant intending to appeal should have done so promptly, if he wished the notice by Us pendens to continue for his protection; otherwise he should be content to pursue his remedies against the parties to the suit and their responsibility for restitution or compensation if the decree on appeal cannot be carried out. Had a lis pendens against the lands been filed with the cross-bill, the appeal must have been taken within three months from the decree, and without holding that, so far as purchasers of lands are concerned, this statutory limit might be regarded as prima facie a reasonable period, I think that the policy of this statute, which prevents the long continuance of clouds on the title to lands by claims against them which have been denied, should be so far followed in this case as to hold that the delay in prosecuting the appeal not being satisfactorily explained, the benefit of the suit as notice has been lost. That any of these purchasers under David A. Conover had notice in fact and outside of the constructive notice by suit; that Edwin Allen claimed subrogation, or that the judgment was in fact paid by the proceeds of sale of the chattels mortgaged to Edwin Allen, has not been proved. That payment was made in this manner is, as against all persons but the actual parties to the origihal suit, the only basis of any equity to set aside the voluntary partition and to enforce the judgment as still existing against the original undivided interest of the judgment debtor in those lands. This absence of notice and the delay of Edwin Allen in prosecuting cither his appeal or his claim to subrogation, after the original decree in chancery, are fatal to his claim to tire benefit of the judgment as an outstanding lien on the lands now held under David A. Con-over, even if the judgment be not considered paid. The equities of these purchasers under the tenant in common not party to the judgment, as between them and Edwin Allen, equitably subrogated to the judgment, may properly be settled on this bill to have the benefit of the judgment. It .is settled in this state that a judgment creditor of one tenant in common is not bound by a voluntary partition made between the tenants in common by mutual deeds after the recovery of his judgment, even though it be fairly made, and that such judgment creditor may decline to be bound by the partition, and may sell under his judgment the undivided interest in the entire lands, as if no partition had been made. Emson v. Polhemus, 28 N. J. Eq. (1 Stew.) 439 (Court of Errors and Appeals, 1877). But it is also settled that the purchaser under the judgment may be brought into equity for a partition of the entire lands owned in common before the voluntary partition, and may also, by equities raised against him or the tenant in common under whom he claims, be required to receive on the partition the lands received by the judgment debtor on the voluntary partition. Polhemus v. Emson, 28 N. J. Eq. (1 Stew.) 576 (Chancellor Runyon, 1877); affirmed on appeal, 29 N. J. Eq. (2 Stew.) 683, 585 (1878). The question, therefore, is whether, considering the judgment as not paid, but outstanding against all persons, the judgment creditor, or Edwin Allen claiming under him, declining to be bound by the partition, are, by any circumstances proved in the case, equitably obliged to carry out the voluntary partition and look to the entire estate in the land released to the judgment debtor, rather than to his undivided interest in the whole land. At the hearing, counsel for Edwin Allen claimed tire right under the judgment to sell first the entire fee in lot So. 6, which was released to Cornelius N. Conover in the partition, but this claim to a right conveyed to the judgment debtor under the partition manifestly validates and accepts the partition as binding. Polhemus v. Emson, 28 N. J. Eq. (1 Stew.) 576, and 29 N. J. Eq. (2 Stew.) 683, show that the partition must be ignored in toto in following out the judgment creditor’s rights, and clearly, unless this were so, the judgment creditor, who held a mere security for a debt of one tenant in common, would get the security also of the estate of tire other tenant in common, repudiating, at the same time, the payment of the price or consideration upon which it was convejml. Speyers, the assignee of the judgment, under whom Edwin Allen claims, accepted the partition by taking a mortgage on the lands released to Cornelius hi. Conovey in the partition. He may, as the holder of the judgment, be bound .to make up any loss to the equitable assignee of the judgment by reason of this acceptance, and the Mapes company may be also liable, secondarily, for such loss or damage occurring .to the security after commencement of the suit, but it would,not be equitable, in view of the delay in the appeal, to ignore the effect of this assignment to Speyers, as accepting a partition; certainly it should not be ignored in the absence of any proof that the division was unfair. I conclude, therefore, that,. in any event, and whether the judgment be considered paid or as a valid security against all parties to the suit, it should' not be enforced 'against the lands released to David A. Conover in the partition. The same conclusion is reached as to the lands released to Mrs. Boice, the dowress, on the voluntary partition. If I am xiglrt in concluding that the judgment was in fact paid, it should not be revived in equity against her mortgagee, the defendant Polhemus, guardian, nor should it be revived against Prueella, the subsequent purchaser of the undivided half interest in the land which descended to Cornelius N. Conover after the judgment was paid. Had Corneliu's still remained the owner, it might have been retained against him by estoppel, as it is against his other lands. If the judgment be considered not paid, the delay in prosecuting the appeal or a suit for subrogation, and the acceptance of the partition by the assignee of the judgment, also entitled Polhemus and Prueella to protection against the judgment.

If the lands of Cornelius N. Conover, which I find to be still liable to be sold for payment of the judgment, do not produce sufficient to pay the amount to which Edwin Allen is entitled under the decree on appeal, then the defendants Cornelius N. Conover, Nevins, as administrator of Mrs. Boice, the defendant Speyers and the Mapes company, are liable to make up the deficiency. This order of liability results from my conclusion that the judgment was really paid by the debtor, and that it was kept alive by the assignment for the purpose of returning to him the money paid or secured to be paid. As to the order of liability, it now strikes me that the judgment debtor, as receiving the money, is first liable; the estate of Mrs. Boice, a party to the suit, to whom the judgment debtor paid the money over with notice, is secondly liable; Speyers, who allowed the payment of the judgment to himself for the purpose of passing it to the judgment debtor, is thirdly liable. As to the Mapes company, while it appears that the receiver, who was their attorney and knew of the assignment to Speyers, paid the money, as he supposed, to Speyers, and did not know that it was received by the attorneys as money belonging to the judgment debtor, yet by their assignment to Speyers pendente lite of the judgment, respecting which an order limiting their control was expressly prayed, they have placed the ■ judgment beyond their control and prevented the carrying out of the conditions imposed by the court of appeal. They must therefore be held liable to Edwin Allen for this result.

If counsel desire to be heard on the question of order of liability in opposition to this view, it may be brought up on settlement of the decree.

If the transaction of the assignment be considered a purchase and not a payment of the judgment, then the liability for deficiency would be somewhat different. The liability in that case would extend only to the difference in the value of the lands received in the partition by the judgment debtor, or subsequently inherited from his mother, and the value of his undivided interest in the whole, lands at the time of the decree in chancery. This difference would be all which, if the judgment continued a lien, was lost by the action pendente Hie of either the Mapes company or Speyers in reference to the judgment. For this deficiency, as between themselves, Speyers would be first liable. If, after receiving the money due on the judgment as his money, he gave it to Conover, the judgment debtor, and released the judgment, he has no equity to a return of the money, or to any further claim on the judgment.

I will advise a decree directing an assignment of the judgment to Edwin Allen, but upon the terms that no proceedings thereunder be taken to sell the lands released to David A. Con-over and Gertrude Y. Boice in the voluntary partition, and that upon the execution of the assignment these lands be released from the judgment. Decree as to further relief, including injunction against use of the warrant of satisfaction and personal liability of any of the defendants, settled on notice.