Opinion
03-06-1896
REEVES et al. v. EVANS et al.
Clarence L. Cole, for complainants. A. B. Endicott, for defendants.
Bill by Francis B. Reeves and others against Annie J. Evans and another to foreclose a mortgage.
Clarence L. Cole, for complainants.
A. B. Endicott, for defendants.
REED, V. C. This bill is filed by Reeves, Parvin & Co. to foreclose a mortgage made by Samuel H. Souders to the complainants, upon two lots of land in Atlantic county, to secure the payment of $700. The mortgage was executed on May 26, 1893. At the time of the filing of this bill, title to the equity of redemption in the two lots was in Annie J. Evans. She therefore was made a party to the bill. In her answer, she sets up that the said lots were conveyed to said Souders by M. Simpson McCullough on September 21, 1886; that she, Mrs. Evans, paid the purchase money for said conveyance; that she caused the deed for the lots to be made to her brother Samuel H. Souders, with his consent, because she was not living with her husband. The evidence supports this statement. It is entirely clear that the consideration paid to McCullough came from Mrs. Evans, and that, by a common understanding between Souders, McCullough, and Mrs. Evans, the title was put in Souders, so that Mrs. Evans could have the right to dispose of the same without control of her husband. From these facts, a trust resulted to Mrs. Evans. The trust follows the legal estate wheresoever it goes, except it comes into the hands of a purchaser for valuable consideration, without notice. Lewin, Trusts, 823. The complainants, therefore, holding the mortgage executed by the owners of the legal title, must rest their right to enforce it upon the grounds that they took it without notice of the trust estate, and for a valuable consideration.
The answer, by way of cross bill, charges that the complainants, when they took this mortgage, were informed of Mrs. Evans' interest in the mortgaged property. The testimony of Souders was to the effect that, previous to or at the time he made this mortgage, he informed one of the firm that the property was his sister's. Mr. Jones, one of the firm, with whom the conversation is alleged to have occurred, says that he has no recollection of hearing any such statement before or at the time of the execution of the mortgage. Taking into consideration the condition of Mr. Souders' health at the time of the transaction as stated by himself, his likelihood to forget details, together with the testimony of Mr. Jones, the member of complainants' firm, I think the mortgage was taken without notice of the trust.
But was the mortgage also taken for value? Now, it appears that the amount secured was in part a then-existing debt of the mortgagor and an existing debt of the mortgagor's son. These, therefore, were antecedent debts; and the rule is settled by the great weight of authoritythat a mortgage taken for a precedent debt does not constitute the mortgagee a purchaser for value. 1 Jones, Mortg. 458; Paneoast v. Duval, 26 N. J. Eq. 445; Martin v. Bowen, 51 N. J. Eq. 452-468, 26 Atl. 823. The amount of these debts cannot be included in the decree.
There was paid at the time of making the mortgage $100 in cash. This is recoverable. It was also agreed that the mortgage should stand security for goods to be delivered in future. So far as the mortgage was understood by the parties at the time to be a security for future indebtedness, it constituted the mortgagee a purchaser from the time when the advances were made by the mortgagee, before he had notice of the existence of the trust. The mortgage for future advances, although its purpose does not appear upon its face, is good if the amount of the advances is within the sum named as the amount secured. Bell v. Fleming's Ex'rs, 12 N. J. Eq. 490; Griffin v. Oil Co., 11 N. J. Eq. 53; 1 Jones, Mortg. § 374.
The amount, therefore, for which the mortgagees can stand as purchasers for value, are (1) the $100 paid at the time, with interest, which sum Mrs. Evans admitted she authorized Souders to borrow; (2) the amount of merchandise sold to the son after the execution of the mortgage, which amounted to $196.81, with interest. For these amounts I will advise a decree.