Neville v. Demeritt

2 N.J. Eq. 321

• Court: New Jersey Court of Chancery
• Decided: July 15, 1840
• Status: Published

Opinion

The Chancellor.

On the 1st of October, 1836, Albert C. Demeritt and his wife executed to Horace H. Ladd a mortgage on a house and lot of land in the city of Newark, to secure the payment of a bond for eight thousand dollars, in one year from the date thereof. This bond and mortgage, on the 28th of November following their date, were assigned by Ladd to the complainant. The object of the bill is to procure the foreclosure and sale of the premises contained in ■ the mortgage, to satisfy the-amount due thereon. No question is made respecting this mortgage ; but the controversy arises upon a mortgage on a part of the same premises, given prior to the complainant’s, (on the 31st ©f May, 1834,) by William Tuttle,- a former owner, to Edward Blackford and others, for one thousand dollars. Whether, under the circumstances, this mortgage for one thousand dollars is or is not a valid and subsisting lien on the property, is the whole dispute in the cause.

The mortgaged premises were purchased by Albert- C. Demeritt, the mortgagor, with a large amount of other property, from William T. Voorhies. At the time of the purchase Voorhies had no deed for the property, but had a verbal agreement with his uncle, William Tuttle, to convey it to him for two thousand two hundred dollars, one thousand two hundred dollars of which was to be- paid in cash- before receiving a deed, and the remainder, being one thousand dollars, was to remain on bond •aud mortgage. Upon the faith of this agreement, Voorhies went on and erected on the lot a large four-story brick building. Voorhies had paid his uncle between two and three hundred dollars only at the time he sold to Demeritt, and the agreement (as alleged) between Yoorhies and Demeritt was, that Demeritt should take Voorliies’s place and fulfil his .contract with Tuttle. It seems that Tuttle had nothing to do with the contract, made between Yoorhies and Demeritt, and was therefore on his part no way bound to vary tire original terms of his agreement for the sale of the lot.

As Demeritt was now substituted in the place of Voorhies, Tuttle was entitled, before giving him a deed, to receive in cash one thousand dollars, and a bond and mortgage for one thousand dollars. This would fully have secured the purchase money, and was a very natural and discreet course. Demeritt and Voorhies, in their negociations, employed David A. Hayes, esquire, as their attorney and agcnl, who called on Tuttle and obtained the deed for the property, and gave him only Dementi's bond aud mortgage for one thousand dollars, but no money. Tuttle says in his answer, that reposing great confidence in Mr. Hayes, and supposing lie knew all about the terms on which the sale was made, he supposed that he would not deliver the deed over to Demeritt until he received the thousand dollars in cash. He relied, in other words, on Mr. Hayes seeing to his rights in the matter. Mr. Hayes, in his deposition, says, that lie was ignorant of the terms of the agreement between Voorhies and Demeritt in its details, at the time he got the deed from Tuttle. That when he handed the bond aud mortgage of Demeritt to Turtle for one thousand dollars, which he had previously caused ■to be executed, and asked for the deed, Tuttle at first hesitated, but finally gave him the deed. He recollects something being said by Tuttle about a thousand dollars, but he supposed at the time that it referred to the thousand dollars secured by the bond and mortgage, and did not know that any thing more was coming’ to Mr. Tuttle. Mr. Hayes, after receiving the deed, supposing the business was all finished, placed it on record. By this course Tuttle parted with the tille to his property, and received a bond and mortgage for one thousand dollars, but without the payment of the remaining thousand dollars, or any security or even evidence that it was due from any person. Shortly after this, and as I suppose on being aroused from so negligent a course by his son, .he sent to Mr. Hayes for the thousand dollars, and was then informed that he had not received it, and had placed the deed on record. Application was made to Demeritt to rectify the mistake, but he never did so. Tuttle then placed his bond and mortgage for one thousand dollars on record, which has since been paid off and discharged.

The situation of the lot then stood thus. Demeritt had the title. There was upon it a mortgage of one thousand dollars given by Tuttle to Blackford and others, and a mortgage of one thousand' dollars given by Demeritt to Tuttle. The object of Tuttle in requiring a payment in cash of one thousand dollars, no doubt was to take up the bond and mortgage to Blackford given by him, and for which he tvas liable on the bond. Things remained in this situation until the summer of 1836, when the Blackford mortgage becoming due, George Douglass, to whom the same had been assigned, called on Tuttle for payment of his bond and mortgage, who advanced the money and caused an assignment of the papers to be made to his son Joseph N. Tuttle, in trust for his use. The answers of the defendants frankly declare that the money was furnished by William Tuttle, and the assignment made with a view to protect him from loss by the nonpayment of the thousand dollars at the delivery of the deed. The assignment of the bond and mortgage is in the usual form, and the instruments are in no way cancelled either by obliterating the names, tearing off the seals, or entering satisfaction on the records. In form the proceedings are right.

Thus far I have stated the facts of this case, as they present- ' ed themselves to my mind, without inquiring into the legality of the proofs by which they are sustained, or settling any principles applicable to them. These will now be considered.

Two of the defendant’s witnesses, and those important to make out his defence', arc objected to as incompetent; to wit, Joseph N. Tuttle, the son and trustee of the defendant William Tuttle, and William T. Voorhies, the original purchaser from Tuttle, and the same who afterwards sold to Demeritt. After carefully considering the objections made, I can see no sufficient reason for excluding them as witnesses. The positions they occupy with respect to this transaction can only affect their credit. Joseph N. Tuttle has no interest, as he declares, and as the whole case shows. He is a mere trustee for his father. In fact, the complainant so charges in his bill, and it is on this very point that he relies for defeating the defendant’s claim. Bad Joseph purchased this bond and mortgage with his own money and on bis own account., no question could be made as to his right to have his money out of the sale of the property. It is because he is a mere trustee, and the whole beneficial interest ill his father, that his rights under the mortgage are denied. The rule which allows a defendant to examine his co-dcfendant is indispensable, otherwise a complainant, to get rid of a witness, has only to make him a party. And this rule will always be granted upon a suggestion that he has no interest in the cause, leaving that question to bo settled at the hearing upon tire proofs. A mere trustee may always be examined as a witness by a co-defendant: 2 Mad. Chan. 416. If it turns out upon the hearing that he lias an interest in the cause; that a decree may be obtained against him, although it be for costs only, then he will bo excluded. This is the amount of tiro cases cited fiom 3 Aik. 401, and 3 Johns. Ch. 612. In the last cited case the witness had a decided interest, was charged as a particeps criminis, and was to be affected by the result of the cause. The cases on this point are numerous, but they all turn on the same question, Has the witness any interest beyond that of a mere trustee? has he any individual concern in the case? if he has, he must be shut out; if not, he is a good witness. What interest has Joseph N. Tuttle in this case beyond that of a naked trustee ? He paid no money, he holds the assignment for another, and whether the decision shall be for or against the defendants, it can make no difference to him. It is said that he asks for costs in his answer. That is true; and so does every defendant in his answer: it is the form in which they are drawn. As to costs, I can place no trustee in a fairer position than this witness, and to exclude him on that account would be to change the rule admitting trustees as witnesses, and shut them out entirely.

The other witness objected to is William T. Yoorhies. He is no party to the suit, and therefore as to him it is a mere question of interest. That interest, if any, must consist in his liability over to William Tuttle for the thousand dollars. No objection was taken to this witness on his examination, and in a case whore that interest might be released by the party offering him, I would certainty not sustain such an objection for the first time made at the hearing, without giving an opportunity to release that interest and for a re-examination, if the party thought proper. As to parties, they are always examined as witnesses, by the very terms of the order, subject to all just exceptions at the hearings but this is not so in the case of witnesses not parties. They should be objected to at the time of their examination. This is the rule in the state of New-York: Mohawk Bank v. Atwater, 2 Paige's Ch. 60 ; and the same will be found suggested in the case of the Ex’rs of Howell v. Auten and others, as the true practice in this court. But in this case, had the objection been taken at the proper time, I do not consider the witness interested in the cause. Tuttle, by accepting Demeritt as the purchaser, and dealing with him upon the same terms as Yoorhies, virtually released Yoorhies from all further liability to him ; especially so upon his neglect to avail himself of that part of his contract which called for the payment of one thousand dollars in money before giving the deed. After this, he had no claim on him. Yoorhies has indeed said, that, rather than Tuttle should lose the thousand dollars he calculated to pay it, but did not feel bound to do so. This is one of those calculations which will be found very seldom realized, and at best but the .expression of an honorable feeling, which can never be set up as a sound objection to any witness, unless he be legally responsible for the money. These witnesses, therefore, are in my judgment competent, and their evidence should be read in the cause.

By the admission of this evidence, the case is relieved from all embarrassment as to the true state of the facts, and they will be found to be correctly considered in the first part of this opinion. The answers of the defendants correspond, so far as Joseph has any knowledge of the facts, and the whole case is confirmed in the view which I have taken of it by the depositions in the cause. Much of the matter in the answers is not responsive to the bill, and much is. The rule is well settled on this point, that the answer, so far as it is a response to the bill, will avail the defendant, unless it be overcome by the testimony of the witnesses; but that, so far as it sets up new matter, it must bo proved. I need not go into any critical examination on this part of the case, for it will be found that the answer of the defendant, so far as it is not responsive to any charges in the bill, has been fully sustained by the witnesses. Yoorhies sustains the answer, by stating, that he was to pay Tuttle for the lot two thousand two hundred dollars : that he was to pay one thousand two hundred dollars on receiving his deed, and secure the balance on bond and mortgage : that in his negociations with Demeritt he told him what his agreement with Tuttle was, that he had paid two hundred dollars, and tiiat he, Demeritt, when he took his deed, must pay one thousand dollars and secure the remaining thousand dollars by bond and mortgage, and that Demeritt acceded to those terms. David A. hlnyes proves tiie transaction as it took place when the deed was given, and that the thousand dollars was never paid. He says Demeritt told him in a conversation he had with him since, that there was a thousand dollars coming on the lot, and that he would pay it to Yoorhies when he fulfilled his contract. And Joseph N. Tuttle says, that when he came home and learned how the business stood, Ire went to New-York in company with Mr. Hayes, to see Mr. Demeritt j and that although he cannot recollect the particulars of the conversation, yet that Demeritt did assent to the proposition then made to him to pay the thousand dollars, and he left him satisfied that he would do so if ho could raise the money.

From all this evidence, I can entertain no doubt as to the nature of this transaction, and that Mr. Tuttle was entitled to receive from Demeritt in cash one thousand dollars more than he got at the time of delivering the deed to Mr. Hayes. I cannot suppose that he would designedly let the title for his property pass out of his hands, without at least some evidence in his possession of the amount due him for the purchase money. He has a clear equity to be restored to this money as against Demeritt and all others who may not be injured by thus reinstating him in his rights. Had Tuttle received this money, he would have taken up the Blackford mortgage, and all would have been right and according to the contract of the parties; and if not, he must have been liable on the covenants in his deed. Demeritt at first probably thought, that as the mortgage was still on the property, it would not make much difference whether Tuttle got the money from him or not; but since then, haviug got into some difficulty with Voorhies, he claims to have the property discharged altogether, and make Tuttle look to Voorhies for his money. This would be rank injustice, and do violence to the whole spirit of the contract.

The property should pay this mortgage, and it remains only to be seen whether the court have the power so to direct. I cannot doubt either the power or the duty of the court so to do. The bond and mortgage are not cancelled. The mortgage remains open on the record, and has always remained there as notice to all the world that the lot it covers was bound to discharge it. Mr. Hayes says that he gave actual notice of its existence to Demeritt before he took the title, and whether the ether parties ever examined it or not, the record was constructive notice to them. It is a rule in equity, that an incumbrance shall be kept alive or considered extinguished, as shall most advance the justice of the case: Starr v. Ellis, 6 Johns. Ch. 395. Why should the aid of the court be given the complainant to declare this mortgage discharged, of. which he had notice, and which upon every principio of justice should, before that is done, be paid out of the property. Had the parlies, when Douglass called for his money, intended to put these papers out of existence, or had innocent persons without notice been affected by it, the cose would have been different; but here it so turns out that an opportunity is afforded of doing complete justice to a party without injuring any body, and I leel myself bound to extend the aid of the court for that purpose.

There is one other view of this case presented by the complainant’s counsel, which must not be overlooked. They insist that if equity calls for the allowance to the defendant of the amount of this mortgage, at all events he is liable on his covenants in his deed to Demcritt, of which the complainant may avail himself, and that to avoid circuity of action the court will give the party the advantage of that position, and settle the whole cause at once. How far a mortgagee can avail himself of these covenants, and indeed how far, or in what cases, the court will adopt this principle, it is not now material or necessary to inquire, since from the view I have taken of the case, there could be no such liability on the part of Tuttle in this court, nor indeed in any other, except upon the technical rules applicable to suits in a court of law. There could be no justice in his paying any damages by reason of an incumbrance circumstanced like the, one we have been considering in this cause. In a proper case for its exercise, it would appear to mo that the course suggested by this argument is sustained by the cases.

I am, for these reasons, of opinion, that tiie bond and mortgage assigned to Joseph N. Tuttle, is a valid lien on the mortgaged premises, and entitled to be first paid, with the defendants’ costs iu this action, They will, of course, stand as security for no more than is due Mr. Tuttle upon his contract with Mr. Voorhies, which is staled to be one thousand dollars with interest from the date of his deed to Domeritt. There must be a reference to a master to ascertain this amount, together with tile amount due the complainant aud the other parties having any mortgage or other claim on the property.

' Order accordingly.