Katzenbach v. Holt

• Decision Date: 08 February 1888
• Citation: 12 A. 383,43 N.J.E. 536
• Parties: KATZENBACH et al. v. HOLT et al.
• Court: New Jersey Court of Chancery

12 A. 383

43 N.J.E. 536

KATZENBACH et al.

v. HOLT et al.

Court of Chancery of New Jersey.

February 8, 1888.

(Syllabus by the Court.)

On bill to set aside mechanic's release, and for injunctions restraining the same being pleaded in an action at law.

James Buchanan and John R. Emery, for complainants. W. D. Holt, per se, and for First National Bank of Trenton. James Aitkins, for A. V. Manning. G. D. W. Vroom, for Conrad B. Bennett et al., trustees. W. Holt Apgar, for defendant West.

BIRD, V. C. This bill is filed to restrain the defendants from setting up a release of a lien claim to an action at law brought upon such lien claim for the purpose of enforcing it against the real estate and premises described in the bill; and upon which real estate the said Manning took a mortgage for $60,000, given to secure the payment of a bond for that amount, which mortgage he assigned to the defendant the First National Bank. The allegations in the bill are that the said release was procured under such circumstances that the defendants should not be permitted to set it up in the said action at law. At the time of the execution of the release there were numerous lien claims upon the said land and premises, amounting in all to over $25,000. At that time Mr. Manning was already liable on Mr. Holt's paper as indorser to the amount of about $30,000, and had taken as security therefor a mortgage upon the said premises to the amount of $30,000, and a chattel mortgage upon all the furniture in the building on said premises. At that time, or very shortly before, he had, as other security, the title to real estate in the city of Trenton, and in the county of Hunterdon, in which, according to Mr. Holt's testimony, there was an equity of $15,000 to $20,000. This title had been conveyed to Mr. Manning by Mr. Holt by first conveying the title to all of the said premises to his brother William Holt, who conveyed it to Mr. Manning. None of these conveyances were recorded; neither was the chattel mortgage, nor the mortgage for $30,000 upon the said premises upon which the said lien is now sought to be enforced. At the time of the execution of the release the building was not wholly completed; and it seemed to be necessary that a large amount of money should be secured in order to effect its completion, and the successful management of it; it having been at that time opened and occupied as a hotel in the city of Trenton, under the name of the "Hotel Windsor." It appears that Mr. Manning was unwilling to become liable any further upon the paper of Mr. Holt, unless the latter would procure the release of the lien claims, which had been filed, and which had priority on said building and lands. He was willing, in case said liens should be released, to accept of a mortgage including the amount for which he had already become liable as indorser, and for which he might thereafter become liable as such indorser. The allegation of the bill and the insistment of counsel are that the proof shows that Mr. Holt, in order to procure the complainants to release their lien, said to them that, if they would do so, he would pay them in cash the amount of certain notes, which had theretofore been given and which had not yet matured, when they should mature, out of certain moneys which he expected to raise by the indorsement of Mr. Manning to the amount of $30,000. And this is the basis upon which the complainants rest their claim. The question, therefore, is, did they release upon the understanding that Mr. Holt had a promise from Mr. Manning that, if the lien claimants would release their liens, and he (Holt) would give him a mortgage to secure the amount of the liens, that he (Manning) would indorse to that amount, and upon the further promise of Mr. Holt that he would pay them the amount of their account, and would pay the notes held by them, or in the bank, against him, as they should become due, out of the money so to be raised by Mr. Manning's indorsement. Mr. Holt procured a release from each of the lien-holders before he asked Katzenbach & Co. to release. One of these he paid the amount clue to him in full; another he paid over 60 per cent.; another over 50 per cent. On July 14, 1885, Katzenbach & Co. filed their lien for $5,800. This they afterwards released upon the payment to them thereon of $2,500 by way of a cheek, all of which perhaps had not yet been paid. It is insisted upon the part of the complainants that they were misled and deceived by Mr. Holt, and also by the bank officers, in this transaction, so that they are not bound by the release which was then executed and delivered to Mr. Holt, upon the strength of which release Mr. Manning accepted a mortgage for $60,000, and made additional indorsements for Mr. Holt, amounting in all to $12,500, or it may be to $15,000.

What was the agreement between Mr. Holt and the complainants at the time of the execution of the release? The complainants both very distinctly say that Mr. Holt said to them in the interview that Mr. Manning had promised him that, if he would get the lien claims released, he would indorse for him beyond what he had already indorsed to the amount of $30,000, and that out of the money so secured he would pay the amount that was due to the complainants on book-account, and would pay the notes which they had against him as they became due. The only material difference between the complainants and the defendant Holt is as to the payments of the notes out of the money that was to be so raised by Mr. Manning's indorsements. Mr. Holt admits that he was to pay them as they became due, but insists that he did not say that they were to be paid out of the money to be raised by Mr. Manning's indorsements. Mr. Stull says that Mr. Holt said to him "that he was going to effect a loan which would clear him of his indebtedness, and that he would be all right; that was the substance of his conversation at that time." The witness was not sure whether this was at the first or a subsequent interview; but upon the next day, the twenty-third of January, 1885, the day that the release was signed, he says Mr. Holt called upon him, and stated what he proposed to do; "that he was going to effect a loan to the amount of $30,000; that Mr. Manning had agreed to loan him $30,000 on the building, provided he could get those lien claims satisfied. * * * He agreed to settle our claim,—that is, the amount of our claim then,—excepting notes that would become due, and they were to be taken care of as they fell due out of this $30,000." The witness says the amount of notes then due was about $3,000. Mr. Katzenbach says that, in his interview with Mr. Holt upon the subject, Mr. Holt said "he had not been able to raise any money upon permanent loan, but expected to get fifty or sixty thousand dollars, and, not being able to pay 6 per cent, or even 5 per cent., he would have to get the mechanics to release their lien claims in order to tide him over until he could make a permanent loan. He said that Mr. Manning would take a mortgage of $30,000 on the hotel if he would get the lien claimants to release their lien claims." That was on the first interview with Mr. Holt. Mr. Katzenbach further states that, upon the day of executing the release, Mr. Holt said "that he was for the present embarrassed for money; that he needed to raise a large amount of money; that Mr. Manning had kindly agreed to loan him $30,000 on the hotel; if he could get that money to pay these lien claims, and pay off these notes as they matured, he would be in good shape, and that in about a year he would be out of debt; that the hotel was running nicely, and that it would soon be making money; it was during the legislative season, and the hotel was doing well. I asked him what there was ahead of this $30,000, and he told me that there was $39,000 ahead of it; that the $39,000 and the $30,000 would make $69,000 on the hotel, I said, and he said, 'Yes.'" On cross-examination Mr. Katzenbach was asked: "Question. Was there to be any change in these notes, only their being met when matured? Answer. You said you would take care of these notes when they matured; yes, sir. Q. So far as you understood it, there was to be no further security for those notes than you had already held, was there? A. Except that you told me that you would pay them out of this money that you got from Mr. Manning."

As I read the testimony of these witnesses, I cannot conjecture how it is that they speak of $30,000, rather than the amount of all the lien claims, or the amount of their own claim, unless such sum ($30,000) was the subject of conversatiou between them and Mr. Holt. If their statements had no foundation in fact, then it seems to me that their minds would more readily and reasonably have fallen upon some one of the other sums talked of. When asked to state what passed, Mr. Holt says: "Among my other creditors who furnished materials was Katzenbach & Co., and I talked the matter over with them. I said to them that Mr. Manning would become accommodation indorser for the purpose of obtaining a sufficient amount of money to pay the amount that would necessarily have to be raised to pay these creditors,—a certain sum; and that the balance I could pay off as time progressed, by asking for renewals, until such time as I could make a permanent loan. I believe I explained to them that I had been unable, up to that point, to make a permanent loan, but that I believed I could. I remember giving particulars in my interview with Mr. Katzenbach and Stull. I distinctly stated to them the amount I was to pay each individual creditor who had a right of lien in those transactions. I don't think I ever referred to Mr. Kenzie, or to the Philadelphia party who afterwards filed a lien. * * * The principal discussion between Mr. Katzenbach, Mr. Stull, and myself, was as to the amount they should receive upon the execution of the release. They insisted that the amount was to be...