Case ID: nj-eq_43/html/0098-01.html
Source: Caselaw Access Project
Author: {"author": "Bird, V. C.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Martha O. Pemberton v. Charles Klein.
    On August 25th, 1884, L., a resident of Pennsylvania, made an assignment there for the benefit of his creditors, including therein certain lands in New Jersey, and the assignment was recorded here on October 14th, 1884. After-wards the assignee sold, and complainant bought, these lands at public auction in the city of Philadelphia. On August 23d, 1884, L. gave defendant, also a resident of Pennsylvania, a mortgage on these lands merely to secure the return of certain stocks which he had loaned L. to secure his bail in case of his arrest, which seemed imminent, and this mortgage was recorded the same day as the assignment, October 14th, 1884. On bill to quiet title — Held,
    (1) That the validity of the mortgage could be assailed in this way.
    (2) That the assignment, as recorded here, was not void because unaccompanied by an official certificate that the assignee had given bond according to the Pennsylvania statute.
    (3) That the assignee’s sale of these lands, outside of the boundaries of this state, was valid.
    (4) That the defendant, who is now prosecuting a suit in Philadelphia for the return of his above-mentioned stocks, cannot, as against the assignee and his grantee (the complainant), claim a superior equity on the ground that he gave a good consideration for his mortgage and that the assignee gave none.
    
      Mr. George T. Ingham, for complainant.
    
      Mr. M. B. Taylor, for defendant.
   Bird, V. C.

The bill in this cause is filed to quiet title to real estate under the statute; it sets forth the purchase of the land from an assignee who took an assignment from a debtor, residing in Pennsylvania, for the benefit of his creditors. The purchaser is in possession. The defendant is the holder of a mortgage on the same premises, which he claims is entitled to priority over the assignment and all sales and proceedings thereof. This mortgage was executed in Philadelphia on August 23d, 1884. The assignment for the benefit of creditors was executed August 25th,, 1884, and was recorded September 8th, 1884, in Atlantic county, in this state, and on account of some defect in the acknowledgment was again acknowledged and again recorded, in Atlantic county October 13th, 1884. The mortgage of the defendant was not recorded until the same day — October 13th, 1884.

Without discussing all the details presented by counsel suffice it to say—

First. That the defendant insists that the complainant has no title whatever, and that if she had she has no title to any relief under the statute (Rev.p. 1188) which provides for the determination of claims to real estate in certain cases, and to quiet the title to the same.

It is insisted that if the complainant conceived that the defendant’s mortgage was illegal or fraudulent as to her she should have attacked the mortgage directly, asking a decree of the court that it be canceled of record. This point has been received in favor of the complainant by the cases of Raymond v. Post, 10 C. E. Gr. 447, and of Powell v. Mayo, 11 C. E. Gr. 120. From the language of the statute and from the explicit declarations of the chancellor I should conclude that, whether the object to be overcome by the bill be a single one or whether the objects be many, or whether there be one or many defendants, relief may be sought in this form of proceeding by the complainant.

Again, it is insisted that the complainant has no title because the assignment for the benefit of creditors was made in a foreign jurisdiction. This point, also, must be determined against the •defendant. It has not been made to appear that in any particular is the assignment which was made in Pennsylvania hostile, or in any sense antagonistic, to our law respecting the same matter. The only defect suggested by the defendant in the proceeding, • clothing the assignee with complete authority to make disposition of lands in New Jersey, is the fact that in recording the assignment in this state it was not accompanied by the certificate of the-surrogate or other proper officer that the assignee had given bond according to the statute. I think this is not a fatal omission, if any. As I understand, the discussion conceded that security was given in the state of Pennsylvania, and that the creditors to-be benefited by the assignment reside within that jurisdiction. No right is claimed by virtue of the statute by any citizen of New Jersey, as a creditor or otherwise, in hostility to the proceedings of the assignee; nor is any claim made to the assets of the debtor for the purpose of administering them in this state-under any form of law whatever; they are to be administered and distributed in Pennsylvania, so far as appears from the record. The defendant being a non-resident, and claiming no part of the assets at the hands of the assignee, I think he is-barred from raising the objection now before us by reason and by the well considered cases of Bentley v. Whittemore, 4 C. E. Gr. and Moore v. Bonnell, 2 Vr. 90.

Yor can the objection that the assignee made sale of the lands in question in a public auction-room in the city of Philadelphia be counted sufficient as a defence to this bill of complaint. If the owner of real estate, being non-resident, may effect a valid transfer of his title to lands in this state, and if he may effectually convey them to an assignee for the benefit of his creditors, it is not unreasonable or inconsistent that an assignee may make sale of such real estate outside of the boundaries of the state of Yew Jersey. There are no conceivable injuries to the rights or interests of any one in his so doing. Indeed, it would seem to be quite unbusinesslike to deprive any one of the advantages which may be derived from a foreign market, when nothing is better known than that the best prices are obtained for real estate in the leading cities of Yew York or Philadelphia. I am constrained to think this view will commend itself to the judgment of every considerate business man, and that it is not in conflict with any opinion or well settled rule of law.

But besides, the court being desirous of protecting the rights of all in such a case, it may be relied upon that if any mischief is wrought the numerous watchful creditors will see to it that the proceedings of an assignee which are at all hostile to their interests will be speedily brought to the attention of the court, and all errors corrected. The courts are open to them; they never are willing to allow property to be sacrificed. The presumption is that the assignee in such a case did his duty, and this presumption is enforced by the fact that no creditor of all those who are interested raised an objection to the sale.

If, however, this objection should be pressed, I am not prepared to conclude that the defendant, who is not only a nonresident, but who holds what he has under and from the same grantor from whom the complainant claims, can be heard at all upon this objection, and especially in the light of the above-named cases.

But to proceed. Klein claims a superior equity in that he gave a good consideration for his mortgage, and urges that the assignee gave none. This assertion has nothing to rest upon. In the most beneficial light for the defendant, he took his mortgage, not in payment of a pre-existing debt, but as collateral security for the return of certain stocks which he had intrusted to Lardner, the assignor; whereas, the assignee took the title for the sole and exclusive purpose of paying all the existing debts of the assignor. This was a pledge for the payment to the extent of the assets, and this pledge the court will always enforce. Alpaugh v. Roberson, 12 C. E. Gr. 96; Scull v. Reeves, 2 Gr. Ch. 84; S. C., Id. 131; Read v. Robinson, 6 Watts & Serg. 329; Seal v. Duffy, 4 Pa. St. 274.

Therefore, in any light it may be contemplated, the complainant is upon a more favorable footing than the defendant.

But in truth and justice, is not the complainant on decidedly the more favorable ground ? It is in evidence that the stock above referred to of the defendant Klein, which Lardner gave the mortgage to secure the return of, was deposited in a bank in the city of Philadelphia, and that Klein is now prosecuting an action at law for its recovery. As the testimony stands, the title to this stock is in him, and he must recover. If he should prevail in that suit, his claim to any right whatever under this mortgage vanishes absolutely. But independently of the last consideration, it may well be questioned whether any court could say that this mortgage has any validity at all. Lardner swears that it was given for the sole purpose of securing bail for himself in case of his arrest, and his statements are not at all inconsistent with those of the counsel who drew the mortgage and who was advising both Lardner and Klein at the time as to the better course for them to pursue. The counsel distinctly says that he, being such counsel for both, suggested to Lardner that as he might expect trouble of a most serious nature, it would be well to provide therefor by conveying his property to those on whom he could rely when the storm came.

Now, whilst as between Klein and Lardner this court might not be wulling to help either, it certainly will not allow the claim of the defendant to be interposed, and the rights of a stranger, who has at least an equal equity, to be overcome by such a transaction.

In my judgment, the complainant is entitled to a decree according to the prayer of her bill, with costs.