Court Opinion

ID: 8267585
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:12:21.369427+00
Date Added: 2024-06-11T16:43:25.225252
License: Public Domain

Parker, J.
(dissenting).
The bill in this cause charges that, in the year 1869, John G. Schenck was indebted to complainant; that for such *785indebtedness, a promissory note was given to complainant, upon which a judgment has been obtained by him against John G. Schenck. The bill also charges that, at the time such indebtedness originated, John G-. Schenck had property more than sufficient in value to pay complainant, and that, with said property, or the proceeds thereof, he has purchased real estate in Belvidere; but had the conveyance thereof made to his wife. The bill further alleges that Sarah R. Schenck (the wife) never had any money or property with which to pay for the real estate in question.
The prayer of the bill is, that the judgment of complainant against John G. Schenck be decreed to be a lien on the real estate at Belvidere; that the said premises be decreed to be held in trust for John G. Schenck, by his wife, liable to the judgment of complainant, and that the same be sold to pay the judgment.
The answers admit the indebtedness, the note, judgment, execution and levy on the Belvidere property, but deny that John G. Schenck had any moneys or securities with which to purchase it. The allegation in the answer of Sarah R. Schenck is, that a mortgage for $7,000, given by Samuel K. "Wilson, was assigned to her by George H. Hart, in consideration of natural love and affection, and that, from the avails of that mortgage, she paid for the Belvidere property.
The complainant admits that the proceeds of the Wilson mortgage paid .for the premises at Belvidere; but he insists that said mortgage was not the property of Mrs. Schenck, but of her husband, .and that, therefore, the said premises belong to him, and are liable for complainant’s judgment against him.
The question, then, is, Who owned the Wilson mortgage? Mrs. Schenck says she did not pay anything for it, but that it was a gift to her from George H. Hart. The complainant says she never owned it, and that it belonged to her husband.. The evidence in the cause proves conclusively that George H. Hart held the mortgage in trust for John G. Schenck, subject only to the indebtedness of Schenck to complainant.
*786In the year 1863, the complainant conveyed the State Street House (in which John G. Schenck then had an interest) to George II. Hart, upon a trust, the terms of which have been as distinctly proved as if they had been evidenced by writing. The terms of the trust were, that George II. Hart should have power to sell and convey the State Street House for the best price he could obtain; and, out of the proceeds,- first pay to complainant whatever sum John G. Schenck should owe him, and then pay over to John G. Schenck any balance that might remain. The terms of this trust were known by Schenck and wife, and assented to by all the parties interested. On the 1st day of March, 1866, George H. Hart conveyed the State Street House to Samuel K. Wilson, and received from him, in part consideration therefor, the $7,000 mortgage before mentioned.
The account between complainant and John G. Schenck, at the time Wilson gave the mortgage, was unsettled. Complainant had paid a large sum of money to Schenek’s creditors, and had assumed the balance of the debts, a part of which he had not yet actually paid. John G. Schenck had no money with which to pay the complainant the balance then due him, but relied upon the proceeds of said mortgage for that purpose; and the mortgage would not mature until March, 1871. Complainant was not willing to have the mortgage assigned to John G. Schenck until his indebtedness to complainant was ascertained and paid, or secured. Consequently, George H. Hart continued, for about three years, to hold the mortgage, upon the same trust as he had held the property he sold Wilson.
In January, 1869, George II. Hart became anxious to be discharged from his trust. The complainant then settled with John G. Schenck, and agreed to accept the joint and several note of Schenck and wife for the amount found due him ($1,600), provided the mortgage should be assigned so that the note should be paid out of its proceeds. To this, all parties assented; and the note, upon which the judgment in question has been entered, was accepted by complainant, *787upon the express agreement and promise of both Mr. and Mrs. Schenck that “it should be paid out of the moneys to be received for the mortgage when it became due,” and for this reason the note was made payable on the very day the mortgage would mature. Had it not been for such agreement and promise, George H. Hart -would not have assigned the mortgage, but would have retained it until it matured, then collected the money, and paid complainant out of the proceeds, in conformity with the trust.
John G. Schenck was called as a witness for defendants. He swore that the assignment of the mortgage to his wife was made against his will; that he protested against it; that it was understood he was to have the mortgage; that the mortgage belonged to him; that he was not present -when the assignment was made, and did not know his wife had the mortgage until a day or two after the assignment to her was made.
On several occasions, Mrs. Schenck stated to different persons that she had no property; that all was her husband’s, and that she could not do anything, except as he told her. She told her father (as appears by his evidence) that the Belvidere property was bought with her husband’s money.
Mary Ann Hart (a sister of complainant and of Mrs. Schenck) testifies that when the complainant asked Mrs. Schenck about the Belvidere property, which stood in her name, she replied that the money was John’s, and it would not do for her to dispose of it without he was willing; that it was John’s money that laid in the property, and she could not control it; and that she had never had any money of her own.
Mrs. Schenck also told the complainant that she could not pay the note, except by John’s consent; that it was all his money; that the property was his, and she had to do as John said; that the property belonged to John, and she could do nothing without him. It also appears, by the evidence, that John G. Schenck used the Belvidere property as *788his own, spoke of it as his, and carried on business there in his own name.
The creditors of John G. Schenck having been paid by complainant, George H. Hart had no right to assign the mortgage except according to the, terms of his trust, to wit, to John G. Schenck, subject to his indebtedness to complainant.
It is said that complainant consented to the transfer to Mrs. Schenck. Even if the complainant had the right at the time of the assignment of the mortgage to direct (beyond his own claim) to whom it should be assigned, his assent to the transfer to Mrs. Schenck was given under the express understanding that the note signed by her husband and herself should be paid out of the mortgage, and Mrs. Schenck took the assignment to hold for her husband’s benefit, accompanied by the agreement and promise to pay the $1,600 note out of the moneys received on the mortgage at its maturity. Mrs. Schenck received the assignment of the mortgage upon the same trust as George H. Hart held it.
From all the evidence upon the issue made by the pleadings, I cannot resist the conclusion that the Wilson mortgage, the proceeds of which went into the Belvidere purchase, belonged to John G. Schenck, and, consequently, that the property is liable for the judgment due the complainant.
On the part of Mrs. Schenck, it is contended, that even if the mortgage belonged to her husband, the complainant cannot have relief in this suit, because of his alleged participation in a prior fraudulent transaction, out of which the debt due him is said to have arisen. The allegation is, that in the year 1860, John G. Schenck conveyed to complainant the State Street House, without consideration, to hinder and defraud creditors, Even if this be true, such defence cannot be made under the pleadings in this cause. No such defence was set up in the answer. The defence therein stated is, that the'Belvidere property was purchased with the proceeds of a mortgage which had been given to *789Mrs. Sehenck by George H. Hart, in consideration of natural love and affection. No allegation of fraud on the part of the complainant, either in the inception of the transaction or at any stage of the business, is made. The court cannot notice a defence not set up in the pleadings. Marsh v. Mitchell, 11 C. E. Gr. 499, 12 C. E. Gr. 631. Evidence relating to matters not stated in the pleadings, is impertinent, and cannot be the foundation of a decree. Vansciver v. Bryan, 2 Beas. 434. In a court of equity as well as in a court of law, the parties are confined to the issues made by the pleadings. Brantingham v. Brantingham, 1 Beas. 160. A defendant must stand by his answer. If he make out a defence not set up in the answer, it will not avail him. Chandler v. Herrick, 3 Stock. 497.
But, if Mrs. Sehenck could avail herself of this defence, the proofs do not sustain it. Her only witness on that question is John G. Sehenck. He says that in the year 1860 he conveyed the State Street House to complainant, to hinder and defraud his creditors. The complainant positively denies this, and says that he bought the property of John G. Sehenck, for a valuable consideration. He details the particulars of the purchase arid payments. He says that John G. Sehenck, at the time, owed him $2,300, to save which was the motive of his purchase.
The complainant, in his evidence, says, in substance, that he thought the property w’as at the time worth all Sehenck owed to him and to others; that he could probably sell it for enough to pay himself and the other creditors of Sehenck, and if he found he could not do that, he would hold the property as an investment.
The circumstances confirm complainant’s version of the transaction. The vouchers he produces correspond with his statement of the amount of the purchase-money, and the mode and time of payment. Complainant paid Schenck’s debts. The best evidence that complainant did not enter into an arrangement to defraud Schenck’s creditors, is the fact that he satisfied their claims.
*790The complainant says that after he purchased the State Street House from Schenck, and litigation was impending, Schenck, at his request, agreed to take the property back, but in such way that complainant should be paid or secured for the amount .he had paid or should pay for him. After the debts were paid, complainant and John G. Schenck could make any disposition of the property they saw fit. Complainant had the right to resell and reconvey to Schenck directly, or to George H. Hart in trust.
Had there been fraud in the original transaction or in the conveyance to George H. Hart, he might have refused (under the ruling in Lokerson v. Stillwell), to assign the mortgage to any one; but he did not refuse and did assign it, with the understanding that it should go for John G. Schenck’s benefit, after payment of complainant’s claim against him.
The complainant has a strong equity in his favor. .After paying the debts of John G. Schenck (except his own claim), the complainant conveyed the property he held, in trust, so that Schenck might have the benefit of the balance of the proceeds after the payment of the debt due complainant. At the time the mortgage was assigned to Mrs. Schenck, she received it on the same trust. Without any compensation for his trouble and risk, complainant paid the other debts, and for his own claim the mortgage and its proceeds were to be responsible. It should be so held by the court. The defendants should not be permitted to take advantage of one who has acted with fairness and liberality towards them, and avoid payment to him, the only remaining creditor, of a debt contracted for the purpose of satisfying the other creditors of John G. Schenck.
The decree of the chancellor should be affirmed.
For affirmance—Depue, Parker, Dodd—3.
For reversal—Dixon, Knapp, Mague, Scudder, Van Syckel, Cole—6.