Case ID: nj-eq_5/html/0113-01.html
Source: Caselaw Access Project
Author: {"author": "The Chancellor.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

GEORGE LOVETT v. DAVID D. DEMAREST AND WIFE AND ELIZABETH BOYD.
    1. A sold a tract of land to B for §9000 ; §4000 to be paid on the delivery of the deed, and the balance of the consideration money to be secured by a mortgage on the premises. Before the deed was executed, it was agreed between the seller and purchaser and O, that if 0 would lend the purchaser §2000, to enable him to make the cash payment of §4000, a first mortgage on the premises should be executed by the purchaser to C for the §2000 to be loaned by him, and that the mortgage to C should be first recorded. 0 loaned the $2000, and the deed and mortgages were made accordingly; and the mortgage to 0 was first recorded. Afterwards A assigned his mortgage to the complainant. Held that O’s mortgage was the first encumbrance.
    2. A certificate of the clerk of the county, setting forth that the mortgage to A was the first and only mortgage on record, shown by A to the complainant when he took the assignment of A’s mortgage, held not to have the effect of giving priority to the mortgage assigned to the complainant.
    3. Every allegation of the answer which is not directly responsive, but sets forth matter in avoidance or bar, is denied by the general replication, and must be proved aliunde.
    
    This is a foreclosure bill. It states that, ou the 24th of May, 1836, one John De Groot sold and conveyed to the defendant David D. Demarest, the premises described in the bill, and that Demarest gave to De Groot his bond of that date for $5000, part of the purchase money; and also with his wife, gave to De Groot the mortgage set forth in the bill, on the premises so sold and conveyed, to secure the payment of the bond. That the mortgage was recorded in the clerk’s office of Bergen county on the 28th of May, 1836. That, on the 3d of November, 1838, De Groot applied to the complainant to buy the bond and mortgage, representing it to be a purchase money mortgage, and a first lien of record on the premises, and ample security for the money mentioned therein. That the complainant, confiding in these representations, and being willing to purchase the bond and mortgage, De Groot thereupon, by assignment of that date, in consideration of $5000 to him paid by the complainant, assigned the same to the complainant. That, on searching the records, preparatory to filing the bill, the complainant first learned that there was on record a mortgage of the same premise's, given by Demarest and his wife to the defendant Elizabeth Boyd, for $2000, purporting to bear date the same 24th of May, 1836, and to have been registered the 25th of that month. The bill claims that the last-mentioned mortgage is subsequent to the complainant’s in fact and in law; and charges that Elizabeth Boyd took her mortgage with full notice of the mortgage of De Groot.
    The answer of Elizabeth Boyd states that, before the day of the date of the mortgage to De Groot, Demarest applied to her to lend him $2000, stating that he was about to buy the premises from De Groot for $9000; that he was to pay $4000 of the purchase money down ; that he had but $2000 in cash, and that if she would lend him $2000, De Groot would agree that she should be secured by the first mortgage on the premises, and that De Groot would take á mortgage subsequent to hers for the remaining $5000 of the purchase money. That, on these conditions, she agreed to loan Demarest the $2000, to be secured by the first mortgage on the premises. That De Groot agreed with her agent, appointed by hpr to conclude the. loan and take the security, that, if she would loan the $2000, he would, on receiving $4000 of the purchase money, accept for the residue of the purchase money a mortgage subsequent to the mortgage to be given to her at the same time, stating that, unless he could get $4000 of the purchase money in cash, he could not procúre a release of the claim of the receivers of the 'Washington Bank on the premises. That, thereupon, it was agreed by De Groot, Demarest, and her, that she should loan the $2000 to Demarest; that this sum, with 2000 dollars more to be paid by Demarest, should be paid to said receivers to procure a release from them to De Groot, and that on the delivery of the release, De Groot was to convey the premises to Demarest; and that thereupon Demarest and his wife should secure this defendant by the first mortgage on the premises, and after that should give De Groot a mortgage on the premises for 5000 dollars, the residue of the purchase money. That in pursuance of said agreement, she, on or about the 24th of May, 1836, lent and advanced to Demarest the 2000 dollars, which, with 2000 dollars more advanced by Demarest, was paid to the said receivers, whereupon they delivered their said release to De Groot, who thereupon executed and delivered to Demarest a deed for the premises; and thereupon Demarest gave his bond to this defendant, dated the said 24th of May, 1836, conditioned for the payment of 2000 dollars, with interest, on or before the 1st of May then next, and a mortgage of the premises of the same date, executed by him and his wife, to secure the same. That said bond and mortgage were delivered to her, in the presence of De Groot, before the bond and mortgage set forth in the complainant’s bill were executed or delivered to De Groot •, and that De Groot, after the mortgage to him was executed and delivered, signed a writing endorsed on this defendant’s mortgage, by which he acknowledged that the mortgage of this defendant was prior in point of date and lien to the mortgage to him, and was to be first paid; and that for greater certainty, and that the priority of this defendant’s mortgage might be manifest to all, the said De Groot agreed not to deposit his mortgage in the clerk’s office for registry until some day after this defendant’s mortgage should be so deposited. That the execution of her mortgage was duly acknowledged on the day of the date thereof, and was received in the clerk’s office on the 25th of that mouth, and was duly registered by the clerk. That she has no knowledge of the assignment to the complainant, of the said mortgage to De Groot, nor of the representation made at the time thereoij by De Groot to complainant, except by the complainant’s bill.
    The defendant Demarest, in his answer, states that the mortgage to Elizabeth Boyd was given to secure 2000 dollars loaned by her to him, to pay De Groot on the purchase of said premises; and that he and his wife, by an arrangement and the express consent of De Groot, and in his presence, executed and delivered to Elizabeth Boyd the said mortgage to her, before the execution and delivery of the mortgage to De Groot; and that this $2000 was paid by him to De Groot, as part of the purchase money for the premises.
    And this defendant, by way of defence against the mortgage to De Groot, in the hands of the complainant, denies that the assignment thereof to the complainant was in consideration of 5000 dollars paid by complainant to De Groot; but says the said assignment was made in pursuance of a usurious contract between De Groot and the complainant, by virtue of which the complainant loaned and advanced to De Groot, partly in money and partly in securities for money, a large part of which proved worthless, 4500 dollars, for which De Groot assigned to the complainant the said bond and mortgage, and also guaranteed and became personally responsible, by writing under his hand, to the complainant, that the complainant should recover and receive from said bond and mortgage, the principal sum of 5000 dollars, with interest at six per cent.; and that said 4500 dollars was advanced to De Groot by the complainant, in money and securities' as aforesaid, upon the said contract and agreement that De Groot should assign the said bond and mortgage and guarantee the same as aforesaid; and claims that thereby the said contract and assignment were rendered usurious and void; and says that De Groot has notified him of the circumstances under which said assignment was made, insists that said assignment is usurious and void, and claims said bond and mortgage as his own property, as if no assignment thereof had ever been made.
    Both mortgages were acknowledged on the day of their date, before A. O. Zabriskie, master in chancery.
    Evidence was taken, and a writing endorsed on the mortgage to Elizabeth Boyd, and signed by De Groot, dated May 24th, 1836, acknowledging that her mortgage was the first lien on the premises, and was to be paid before the mortgage given to him on the same premises was exhibited.
    
      J. D. Miller, for the complainant, cited 2 Johns. Ch. R. 603; 15 lb. 458.
    
      
      A. O. Zabriskie, for the defendants, cited 1 Green’s Chan. R. 42, 161, 335; 2 Harrison 191.
   The Chancellor.

The facts set forth in the answer of

Elizabeth Boyd, on which the priority of her mortgage is claimed, are fully proved by the testimony of A. O. Zabriskie, esquire, who drew and witnessed the execution of both bonds and mortgages, and before whom both mortgages were acknowledged, and who was also one of the receivers of the Washington Bank; and by the writing signed by De Groot and endorsed on the mortgage of Elizabeth Boyd. There can be no doubt that under these circumstances the mortgage of Elizabeth Boyd is the prior lien. Though the mortgage to De Groot was for a part of the consideration money for which he sold the premises to Demarest, yet he might agree that Demarest should first execute and deliver to another a mortgage on the same premises, and that such prior mortgage should be first recorded. If by collusion between Demarest and Elizabeth Boyd, a mortgage had been made by Demarest to her without' De Groot’s knowledge, and for the fraudulent purpose of interposing a prior lien, a court of equity would relieve; but here, the arrangement was made by De Groot’s express consent, and was, to the knowledge of De Groot, the inducing cause or reason of the loan by Elizabeth Boyd to Demarest. It would be a fraud on her to permit De Groot to postpone her claim; nor can her claim be postponed in favor of De Groot’s assignee. Her mortgage was first recorded, and it was so recorded by the consent and agreement of De Groot.

The evidence of Lewis B. Cobb, that when the assignment by De Groot to complainant was made, De Groot produced a paper purporting to be a certificate of the clerk of Bergen, setting forth that the mortgage assigned was the first and only mortgage, if at all competent, could not avail the complainant. That paper was taken away by De Groot, and is not produced in evidence. But if the clerk gave any such certificate, it could not affect the mortgage of Elizabeth Boyd, if it was contrary to the fact.

Demarest, the mortgagor, sets up in his answer that the assignment to the complainant of the De Groot mortgage was usurious. That De Groot, when he made the assignment, gave his personal guaranty, by writing under his hand, to the complainant, that the complainant should receive from the said bond and mortgage the whole sum mentioned therein, and interest; that this guaranty made the assignment usurious, and that no decree should be made in favor of the complainant. No such, guaranty appears in the written assignment, and no proof of any guaranty is made in the cause. The counsel for Demarest contends that the allegation to that effect in Demarest’s answer is sufficient proof of the fact, unless disproved by testimony on the part of the complainant. This position cannot be maintained. A replication was filed. The complainant proves and produces the mortgage and an assignment thereof to him, in which no guaranty appears; and the defendant gives no evidence whatever of the allegation in his answer. The oases cited by the defendant’s counsel from 1 Oreen, cannot be supposed to sanction the idea that, under such circumstances, the allegation of the answer is sufficient to establish the fact of usury. If a complainant sets down his cause for hearing on bill and answer, the answer is evidence of the facts set up indefence; but matters respecting which no inquiry is made by the bill, and which are set up in the answer in avoidance or in bar, are denied by the replication, aud must be proved aliunde.

There is no proof, therefore, before the court, of the guaranty, on the allegation of which the defence of usury is set up.

■ This makes it unnecessary to consider whether the principle adopted by our Supreme Court in the case of Freeman v. Brit-tan, in reference to usurious endorsements of commercial paper, would be applicable to this case if the guaranty was proved.

A decree will be made for the sale of the premises, to pay, first, the mortgage to the defendant Elizabeth Boyd, and, next, the mortgage held by the complainant.