Johnston v. McKenna

• Decision Date: 22 July 1909
• Parties: JOHNSTON v. McKENNA et al.
• Court: New Jersey Court of Chancery

74 A. 284

76 N.J.E. 217

JOHNSTON

v. McKENNA et al.

Court of Chancery of New Jersey.

July 22, 1909.

Suit by Aaron E. Johnston, executor, against Thomas P. McKeuna and others. Decree for complainant on final hearing on bill, etc.

Aaron E. Johnston and Frank P. McDermott, for complainant. Charles J. Roe, for defendant Hugh E. O'Reilly. Joseph Coult, for defendant Thomas P. McKenna.

HOWELL, V. C. This bill is filed by the administrator of the estate of Mary E. Throckmorton to recover the sum of $8,000 or thereabouts, being the surplus money arising from the foreclosure of a mortgage on lands owned by his intestate in Monmouth county, and which it is alleged was wrongly diverted from her by the joint action of Patrick J. Reilly, Hugh E. O'Reilly, Jr., and Thomas P. McKcnna. The property is known as the Rockwell Hotel. It was purchased by Mrs. Throckmorton on May 4, 1882, from a firm of liquor dealers in New York named O'Reilly, Skelly & Fogarty. Their deed to her is dated on that day. On the same day she gave back to the firm a purchase-money mortgage for $4,900. On account of the death of Fogarty, the firm went into liquidation. He left a will by which he appointed the surviving partners to be executors thereof. On February 23, 1892, Mrs. Throckmorton made a second mortgage on her hotel property to the O'Reilly, Skelly & Fogarty Company to secure a loan of $2,000. This mortgage was subsequently transferred to the executors, Hugh O'Reilly and Skelly, and thus these executors as executors and as individuals held title to both mortgages. On December 18, 1899, C. A. Spalding recovered a judgment against Mrs. Throckmorton for $283. On March 22, 1899, M. Wooley recovered one for $24, and on July 8, 1899, Clarence Van Note recovered one for $339, on all Of which executions were issued under which levies were made on the mortgaged premises. The property was advertised for sale by the sheriff of Monmouth county for July 30, 1900, and was sold on that day to Van Note, who meantime had taken an assignment of the Spalding judgment. A sheriff's deed was made to Van Note for the property on August 2, 1900, from which time forward he claimed to be the owner of the fee therein. Meantime taxes for several years remained unpaid. Thomas P. McKenna, one of the defendants, took title under tax sales for 1898, 1899, and 1900, which he transferred to Howard Green. Van Note therefore held title subject to the two mortgages and the tax liens. On October 4, 1900, the mortgagees filed their bill to foreclose the two mortgages. Mrs. Throckmorton and Van Note were parties. Mrs. Throckmorton could not be found to be served, and an attempt was made to bring her in by publication. She filed no answer, and a decree pro confesso was taken against her on March 23. 1901. There was a final decree on May 20, 1901, and fi. fa. issued on June 12, 1901. The sheriff advertised the premises for sale, and they were sold on August 5, 1901, to the defendant Patrick J. Reilly for $16,300. The sum due for liens on that day was $8,2(53.92. This included $.353.35 due to Howard Green for his tax lien. It left a surplus of $8,036.08, which is the subject-matter of this suit. Van Note held title until the day of sale. On that day, and just be fore the sale, he made a conveyance of the premises to Patrick J. Reilly. This conveyance is important, and will be mentioned later on. This deed to Patrick J. Reilly gave him on the face of the papers the title to the fee simple of the land, and it consequently gave him the right to the surplus money. On Au gust 14th Patrick J. Reilly (Thomas P. Mc Kenna acting as his solicitor) presented to this court a petition setting out the proceedings in the foreclosure suit, his purchase at the sheriff's sale, the conveyance of the fee to Patrick J. Reilly by Van Note and his claim to the surplus money, and praying that an order might be made directing the sheriff to accept his receipt as payment of the balance of the purchase money. On that day an order was made referring the matter to a special master to ascertain the truth of the allegations, and also whether the petitioner was entitled to have the sheriff accept his receipt for the surplus money. A report was made upon this reference on August 16th in accordance with the prayer of the petition, which was confirmed on August 20th by an order that directed the sheriff to accept the receipt of Patrick J. Reilly as payment to the extent of the balance of the purchase money arising from the sale over and above the amount directed to be raised by the execution. It was by this means that the surplus money was diverted from Mr. Van Note and Mrs. Throckmorton to Patrick J. Reilly. At the time of the sheriff's sale the property was in the actual possession of one Vaugoine, who held under a lease from Nathanson, who held under Mrs. Throckmorton. Vaugoine attorned to Van Note, and Nathanson's attempt to assert title failed. Vaugoine paid Van Note rent at the rate of $1,500 a year besides sewer and water rents and repairs.

The events which led up to this suit occurred a few days before the foreclosure sale. There is no doubt but that McKenna and Hugh E. O'Reilly, or certainly McKenna, attempted to purchase Mrs. Throckmorton's interest in the property some time before the foreclosure sale. This is shown by the testimony of Mr. and Mrs. Childs at whose house Mrs. Throckmorton was living. They state that Mr. McKenna and another gentleman came there to see Mrs. Throckmorton, and that they attempted a negotiation with her about this property, but that she refused to sell them her interest. Tbis statement of these two witnesses is partially denied, although both O'Reilly and McKenna admit that they went to the Childs house on at least one occasion for the purpose of seeing Mrs. Throckmorton. Van Note says that he met Mrs. Throckmorton in McKenna's office about a week before this sale, and that McKenna then and there said to him, Van Note, that he, McKenna, represented Mrs. Throckmorton, and that an agreement had been made that the O'Reilly firm, mortgagees, would protect Mrs. Throckmorton, and that Hugh E. O'Reilly became a party to the arrangement a couple of days before the sheriff's sale. Van Note says the agreement was that he was to receive $1,250 and make a conveyance of the property to Mrs. Throckmorton or to some one that she and the mortgagees together might designate, and that the property was to be held by the grantee for her benefit; or, on the other hand, if it might be so agreed, the third person might receive the rents, pay Mrs. Throckmorton a small amount for her support, and use the balance to reduce the claims, and that, when the claims had been reduced to a figure somewhere near the face of the original mortgages, a conveyance was to be made back to Mrs. Throckmorton, and that in the meantime, if a sale could be made, it was to be by consent of the mortgagees and Mrs. Throckmorton, and any sum received above the amount which the mortgagees had in the property and their necessary expenses was to go to Mrs. Throckmorton. He further says that, in pursuance of this agreement, he, on the Saturday preceding the sale, drew a deed for the premises in question to the defendant Hugh E. O'Reilly, that the defendant McKenna took the acknowledgment of Van Note and his wife, and that the defendant O'Reilly then offered him his personal check for $1,250. Van Note declined to take it until he had a consent from Mrs. Throckmorton. The defendants O'Reilly and McKenna then stated that they would not use the deed for any purpose until they had the proper authority from Mrs. Throckmorton, but desired to take the deed, leaving the check, and stating they would be back later in the day. He says that they did come back about 7 or 8 o'clock in the evening, and stated that they could not find Mrs. Throckmorton; that they were very anxious to have the sheriff's sale come off on the following Monday, and sought to obtain Van Note's release and a final delivery of the deed; that Van Note finally consented to deliver the deed and accept a check upon the defendants' promise that they would get Mrs. Throckmorton's consent before the sale or as soon as possible afterwards. On Monday morning, the day of the sale, Van Note says that O'Reilly and McKenna came to him and asked him if he would make a deed for the premises to Patrick J. Reilly. His recollection is that a new deed was prepared by himself early Monday morning before the parties went to Freehold to attend the foreclosure sale, and that McKenna came again and took the acknowledgments, and that the old deed was destroyed. I may pause here to say that the deed in question, a certified copy of which was put in evidence, shows that it was dated and acknowledged on Saturday, August 3, 1901. The check for $1,250 drawn toy Hugh E. O'Reilly, which was delivered to Van Note on Saturday, was deposited by him on Monday morning to his credit in the Long Branch Bank. Payment on that check was stopped by the drawer, and either Tuesday evening or Wednesday morning O'Reilly delivered to Van Note the check of Patrick J. Reilly for $1,250, which was deposited on Wednesday, August 7th, and was paid in regular course. The sum and substance of Mr. Van Note's testimony is that, when he transferred the property to Reilly, he did it at the request of O'Reilly and McKenna, and wholly for the advantage of Mrs. Throckmorton, and in order that she might have the benefit of the large equity which would remain after satisfaction of the mortgages and the tax liens. It is quite apparent that if this statement is true, or substantially true, or if there was any engagement or understanding between these parties that Mrs. Throckmorton was to have the ultimate benefit of her own property, there must in justice be a decree in favor of the complainant.

I do not regard the testimony as to what took place between Mr. McKenna, Mr. O'Reilly, Mr. Duffy, and Mr. Van Note on the beach...