Doying v. Chesebrough

• Decision Date: 01 March 1897
• Citation: 36 A. 893
• Parties: DOYING et al. v. CHESEBROUGH et al.
• Court: New Jersey Court of Chancery

36 A. 893

DOYING et al.

v. CHESEBROUGH et al.

Court of Chancery of New Jersey.

March 1, 1897.

Bill by Henry J. E. Doying and others against Nicholas H. Chesebrough and another to have a deed declared a mortgage, and to restrain proceedings at law to recover possession of the premises conveyed. Decree for defendants.

John W. Queen, Charles L. Corbin, and John C. Shaw, for complainants.

J. B. Vredenburgh and Abel I. Smith, for defendant Chesebrough.

J. O. H. Pitney, for defendant Cranstoun.

EMERY, V. C. This bill is filed by Henry J. E. Doying, William A. E. Doying, and Arthur S. Doying, three sons of Ira E. Doying, against Nicholas H. Chesebrough and William Cranstoun, the last named being made party defendant for discovery only, no relief being asked against him. The object of the bill is twofold: First and mainly, to obtain a declaration and decree that a deed executed by one Mary D. Francis to the defendant Chesebrough, on or about April 6, 1894, and conveying a property known as the "Hotel Beechwood," in Summit, N. J., although absolute on its face, was in reality a mortgage on lands held by Mary D. Francis, in trust for complainants, and is held by Dr. Chesebrough as security for money advanced by him to the complainants; and, in the second place, to restrain proceedings at law begun by Dr. Chesebrough to recover from one of the complainants the possession of the premises included in the deed. These proceedings were commenced before a district court under the landlord and tenant acts, and were based on a lease (or alleged lease) of these premises, made by Chesebrough to Henry J. E. Doying, one of the complainants. This lease of the premises, dated July 24, 1894, by its terms, expired on May 1, 1896, and on its expiration the proceedings for dispossession were at once instituted. Complainants allege that the lease was never executed or delivered. Complainants, at the commencement of the suit (or one of them), were in possession of the premises; and a bill is filed for an account of the money due to Chesebrough from complainants, to obtain a decree that the lands are held by him as security for this debt, and then in trust for complainants, to set aside the lease, and restrain proceedings under it. The defendant Chesebrough denies that the title is held by him in trust for complainant, or as other than his absolute property, and sets up the statute of frauds specially as a defense. As to the lease, he asserts its execution and delivery, and claims that the only interest of complainants, or of any of them, in the premises, was the interest derived from the lease, which has expired by its terms. As to the execution and delivery of the lease, the bill charges (paragraph 8) that, at the time Henry J. E. Doying signed the lease, there was no amount of rent specified in the lease; and that there was a blank option for the purchase of the property; and that, after signing the lease in this condition, Henry Doying refused to deliver the lease; and that it was taken from complainants' possession without their authority; and that it was never fully executed, and was never delivered. The defendants deny these allegations as to the condition of the lease when signed by Henry Doying, and allege that it was executed by him in its present form, and was a valid lease.

The issues raised in reference to the execution and delivery of the lease are manifestly purely of a legal character, and, if these were the only questions involved, the decision of these questions would properly be left to the court of law and the tribunal of a jury. But the main equitable question on the whole case is whether the deed of April 6, 1894, was an absolute deed, or was made by way of security or mortgage to Chesebrough; and, if it should be found to be in reality a mortgage, then the question properly arises for decision in this court whether the execution and delivery of a lease has extinguished the equity. The lease, moreover, contains an express provision or option of purchase of the premises by the lessee, and if, in fact, the lease was executed and delivered, then the question of mortgage or no mortgage is narrowed down to the question whether there was a mortgage, or merely a lease, with a privilege of purchase or reconveyance. And not only is the legal question as to the lease thus of importance on the equitable issues involved in the pleadings, but the complainants and defendant have both consented to orders made in this suit putting the premises in the hands of a receiver pendente lite, thus committing to this court, in this suit, the control of their legal rights as to the possession of the premises under the lease. The question as to the execution and delivery of the lease is therefore of vital importance on the questions here involved, and, as it seems to me, is the first issue of fact to be settled in order to arrive at a sure starting point to deal with the equities of the ease. This issue of fact I decide in favor of the defendant, and, upon the whole evidence, conclude that the defendant has satisfactorily made out that the lease was executed and delivered by the complainant Henry J. E. Doying, at or about the day of its date, July 24, 1894. The direct evidence upon the question of the condition of the lease at the time it was signed by Henry J. E. Doying is that of Ira E. Doying, father of the complainants, on one side, and the defendant Mr. Cranstoun, on the other. Their accounts of the transaction are flatly contradictory, but Mr. Cranstoun's statement is the more reliable in my judgment, and it is corroborated by the evidence of Dr. Chesebrough, by the appearance of the paper itself, and by the conduct of the parties, which conformed to its terms, after its execution, and has not been otherwise satisfactorily explained. Mr. Doying's account is to some extent corroborated by the evidence of two witnesses, but their evidence is plainly insufficient to overcome the defendant's direct, testimony; and the credibility of Ira E. Doying's present statement as to the custody of the lease is seriously impaired by the evidence of Mr. Williams, to whom he made different statements upon this point, and by his sworn statements made in suits pending during the term of the lease. The failure, moreover, of the complainant Henry J. E. Doying to give any evidence, either on complainants' case or on rebuttal, after the clear and distinct statement by Mr. Cranstoun of the circumstances of Henry's execution of the lease, is of itself sufficient to arouse suspicion and doubt as to the reliability of Ira E. Doying's evidence on this point; and, on the whole evidence, I conclude, therefore, that the lease was executed and delivered by the complainant Henry J. E. Doying in its present condition.

This lease, dated July 24, 1894, was for the term of one year and nine months from August 1, 1894, reserving to the lessor rooms 303 and 305 in the hotel, and, as executed by Henry J. E. Doying, contained the following clause for purchase: 'And the said party of the first part [the lessor], for himself, his heirs, executors, administrators, and assigns, further covenants and agrees to and with the said party of the second part, his heirs, executors, administrators, and assigns, to grant and give him the option of purchasing the said above-demised premises, at any time during said term, together with the furniture and other things contained in the said house, at and for the sum of—dollars, the amount due to the said party of the first part at the time of such purchase." The lease had been previously signed by Dr. Chesebrough at the office of Mr. Cranstoun, his counsel, in Hoboken, and executed by him. The amount of the purchase option was stated in the lease at $173,000, being the total amount which up to that time, according to the statement given to him by his counsel, he had advanced or become liable for in the purchase of the lands for the hotel, and the construction and furnishing of the hotel. Before the execution by Henry Doying, and at the request of Ira E. Doying, who really acted for his son, the words "one hundred and seventy-three thousand" were erased, and the words "the amount due to the said party of the first part at the time of such purchase" inserted. Dr. Chesebrough was advised of this change by his counsel, who either told him of it, or showed him the lease, as executed by Doying, within a day or two after the change, and before Dr. Chesebrough occupied the rooms reserved, which he did about July 29 or 30, 1894.

Treating the lease in its present form as one of the written evidences of title regulating the legal status of the complainant Henry Doying and the defendant Chesebrough, I come to the consideration of the main question of fact involved in the case, viz. whether this defendant holds the absolute title under the deed, or whether it should be declared that he holds the legal title only as security for debts due to him from complainants, and then in trust for complainants after the payment of these debts. The evidence bearing on this main question is voluminous, and I shall state merely those facts which I find to be established by the pleadings and proofs, and which seem to me to be material.

In the fall of 1892, Ira E. Doying, William A. Davis, and William Cranstoun formed a plan of building an hotel at Summit, and purchasing lands for the purpose from the Beechwood Land Company. Doying was a contractor and builder of large experience, but without means or credit, and unsatisfied judgments were outstanding against him. Davis was a brother-in-law of Doying, and also a builder, of small means. Cranstoun was a counselor at law, living at Summit, with his office at Hoboken. Neither of the three, nor all of them combined, had sufficient financial responsibility to carry out the scheme without the assistance of loans from other sources; and it was agreed between the three that Cranstoun was to procure the loan, Doying and...