Boice v. Conover

• Decision Date: 14 August 1896
• Citation: 35 A. 402,54 N.J.E. 531
• Parties: BOICE et al. v. CONOVER et al.
• Court: New Jersey Court of Chancery

35 A. 402

54 N.J.E. 531

BOICE et al.

v. CONOVER et al.

Court of Chancery of New Jersey.

Aug. 14, 1896.

Bill by Gertrude D. Boice and others against Cornelius N. Conover and others to foreclose a chattel mortgage, and for the appointment of a receiver. Receiver appointed, and decree rendered, foreclosing complainants' mortgage, and that of defendant Edwin Allen, set up by cross bill, and determining priorities of mortgages and the claim of the defendant Mapes Formula & Guano Company, as a judgment creditor of the mortgagor.

John S. Voorhees for complainants.

Alan H. Strong, for defendant Edwin Allen.

Chas. H. Runyon, for defendant Mapes Formula & Guano Co.

EMERY, V. C. The dispute in this case relates to the respective priorities of two chattel mortgages, and of a judgment and execution creditor; one chattel mortgage being held by complainants, one by the defendant Edwin Allen, and the execution creditor being the defendant the Mapes Formula & Guano Company. Both chattel mortgages were given by the defendants Cornelius N. Conover and William Allen, partners as Conover & Allen; the complainants' mortgage being dated on October 21, 1893, and recorded October 25, 1893, subsequent to the defendant Allen's mortgage, which was dated September 8, 1893, and recorded September 9, 1893. The two mortgages cover the same property, and include the partnership stock, horses, wagons, etc., goods and fixtures, and also the books of account, debts, etc., due or to become due to the firm. The judgment of the Mapes, etc., Company, was obtained on December 12, 1893, in the Middlesex circuit court, for $1,090.61 damages, and $33.50 costs, upon an account due from the firm of Conover & Allen, which, as appears from the record of the judgment, was incurred between February 2 and April 10, 1893, and previous to the execution of either of the chattel mortgages. Upon execution issued under this judgment, levy was made upon the goods and chattels covered by the chattel mortgages (but not upon the book accounts and choses in action mortgaged), and also upon the separate interest of Conover, one of the members of the firm, in certain real estate in Middlesex county. Levy was made on the execution before the filing of complainants' bill. On December 28, 1893, complainants filed a bill to foreclose their chattel mortgage, disputing the priority of defendant Allen's mortgage as to $2,000, part of the debt secured by it, on the ground that this portion of the debt secured by Allen's mortgage was the individual debt of William Allen, one of the partners, and was not a firm debt, and the mortgage was therefore charged to be fraudulent and voluntary as to complainants' mortgage, which was given to secure a firm debt or liability. Upon this bill, a receiver of the mortgaged property was appointed, the receiver being Mr. 'C. H. Runyon, the attorney of the Mapes Company, and the mortgaged property (including the book accounts and debts due) has been sold and collected. Out of the proceeds, the receiver has paid to Edwin Allen the sum of $2,017.78, under orders of the court (consented to by complainants), to be applied on that part of the debt secured by Edwin Allen's mortgage which was not disputed by complainants' original bill. Subsequent to this sale and collection by the receiver and to these payments, and in order to reach the funds in court for application on his mortgage, the defendant Edwin Allen (at the suggestion of the court, made when the case was brought to hearing) filed a cross bill upon his mortgage against the complainants and the Mapes, etc., Company, who had not put in any answer to the original bill. In its answer to the cross bill, the Mapes Company attacks the Allen mortgage as void for want of a proper affidavit under the statute relating to chattel mortgages, and also as a voluntary mortgage to the extent of $2,000, in that it was given to this extent by the members of the firm, upon the firm property, to secure an individual debt of one of the partners, and is therefore void as against the judgment creditors of the firm, whose debts existed at the time of the mortgage.

The defendant Edwin Allen alleges that the entire indebtedness secured, or intended to be secured, by his mortgage, was a partnership debt or liability; and, as against the execution creditor, defendant also alleges that the real estate of Conover, one of the defendants in execution, is sufficient to satisfy the execution, and claims that this must be first sold before resorting to the goods and chattels of the firm. The Allen mortgage was given to secure the payment of $4,800 on demand, with interest from the date of the mortgage (September 8, 1893); and, in his affidavit annexed to the mortgage, Edwin Allen, the mortgagee, swears that "the true consideration of the said mortgage is as follows, viz. the sum of four thousand eight hundred dollars, cash money loaned by this deponent to said Cornelius N. Conover and William Allen, partners, trading as Conover & Allen, at their request, and before the execution hereof, and now due and owing from them to this deponent; and the deponent further says that there is due on said mortgage the sum of forty-eight hundred dollars, besides lawful interest thereon from the 8th day of September, 1893." It is admitted by the answer and the cross bill of Edwin Allen, and is undisputed on the evidence, that, at the time of giving the mortgage, neither the firm nor William Allen owed Edwin Allen more than $2,000, and that the $2,800 additional included in the mortgage represented notes to that amount which Edwin Allen had indorsed for the accommodation of the firm, and on which he was liable as indorser, but which were not then due; so that to this extent the true state of the indebtedness and the true consideration of the mortgage were not disclosed by the mortgage or affidavit. The execution creditor insists that this failure to disclose the true consideration of the mortgage avoids the mortgage as to it under the statute, and also that the affidavit that any of the $2,000 indebtedness was due or to become due from the firm was false in fact; this being a debt due solely from William Allen for the capital advanced by William Allen to the firm. The disputed question of fact in the case is whether the $2,000 was an indebtedness due from the firm, or only from William Allen; and, upon the whole evidence, I reach the conclusion that the debt was not a firm debt, but was due to Edwin Allen from his son William alone, and not from the firm. Edwin Allen had no dealings whatever with Conover, the other partner, in relation to the advance of the $2,000; and this money was at different times between June 20, 1892, and August 3, 1892, paid or advanced by Edwin Allen to his son William, the evidence of Indebtedness in each case being notes signed by William Allen alone, which were delivered by him to his father, and were renewed when due by the son's obligations alone By the agreement between the partners, each was to contribute $2,500 capital; and, in the books of the firm, which were kept by William Allen, he entered the moneys received by him from his father as part of the credit to his account as a partner. So far as William is concerned, this and the other evidence in the case (showing that, up to the time of giving the mortgage, these advances from his father had not been treated as a partnership liability) is conclusive, and entirely overcomes his present statement that the money was originally advanced as a loan to the firm. William Allen's statement that the advances from his father were put in his account, "so that it could be either way, that I owed it to him or the firm owed it to him," is of itself sufficient to discredit his present evidence. As to Edwin Allen's evidence on this point, it appears that he knew that it would require about $5,000 or $6,000 to buy the stock or business which the firm proposed to take, and that, before the partnership was formed, he promised his son to let them have $2,000. $1,000 of the amount was advanced June 20, 1892, on a note for one year, signed only by his son; $300, on July 15, 1892, on a similar note. These two notes were renewed on falling due, June 20, 1893, and July 15, 1893, by other notes of the son alone, for one year. On July 23, 1892, there was another advance by Edwin Allen to his son of $500, for which he took his son's note, probably at one year; and on August 3, 1892, the fourth and last advance, of $150, on William's note for one year. The former was renewed on July 23, 1893, by a note of six months, and the latter on August 3, 1893, by a note at one year. These notes make up $1,950, and are all the evidences of indebtedness produced in relation to the advances, and Edwin Allen still retained all these renewed notes up to the time of hearing. His explanation of the notes being signed by his son, and not by the firm, is that "he wasn't near the firm's place of business, and, when he gave me these, I didn't have any idea of trouble ahead. I was careless in taking them in that way." This explanation, given when "trouble" had arisen, and his advance to his son is put in jeopardy, is not sufficient to overcome the effect of the written evidence agreed on by the parties at the time of the advances, by taking the securities of his son alone. The time for repayment fixed by the notes is an additional indication that the advances were not temporary loans to the firm, which were to be repaid by them, but that they were advances to the son alone. The money advanced undoubtedly went to the use of the firm, but this is not sufficient to constitute the lender a creditor of the firm (Bannister v. Miller [N. J. Ch.; Oct, 1895] 32 Atl. 1066, Reed, V. C); and the question is whether Edwin Allen advanced the money to his son, or whether he advanced it to the firm. Considering the situation and the relationship of the parties, the security given (being notes of the son alone), and...