Lembeck & Betz Eagle Brewing Co. v. Kelly

• Decision Date: 27 March 1902
• Citation: 51 A. 794,63 N.J.E. 401
• Parties: LEMBECK & BETZ EAGLE BREWING CO. v. KELLY et al.
• Court: New Jersey Court of Chancery

51 A. 794

63 N.J.E. 401

LEMBECK & BETZ EAGLE BREWING CO.

v. KELLY et al.

Court of Chancery of New Jersey.

March 27, 1902.

Suit by the Lembeck & Betz Eagle Brewing Company against Annie Kelly and another, executors of Simon Kelly, deceased. Decree for complainant on final hearing on bill, answer, and proofs.

The complainant, the Lembeck & Betz Eagle Brewing Company, files its bill against the defendants to foreclose a mortgage given to it by Simon Kelly, deceased. The mortgage is dated September 1, 1896, and was given to secure the sum of $10,000 on the 1st day of March, 1897, with interest payable semiannually. The instrument was duly acknowledged by Kelly in April, 1897, and recorded as a mortgage of real estate on March 1, 1900,—3 1/2 years after its date, and nearly 3 years after its acknowledgment. Kelly died May 31, 1900, leaving a last will and testament, of which the defendants are the executors. The estate of Kelly is hopelessly insolvent The subject-matter of the mortgage is a leasehold estate in certain lands in the county of Hudson, which estate was vested in Kelly by virtue of an indenture of lease dated August 26, 1895, made by the West Shore Railroad Company and the New York Central Railroad Company to said Kelly. By that indenture the lessors "granted, demised, and farm let" to Kelly certain lands particularly described, to have and to hold the same unto the said Kelly, his executors, administrators, and assigns, from the first day of September, 1895, for and during and until the end of the term of ten years next ensuing, reserving a rent of $120 a year, which rent Kelly agreed to pay, besides "all taxes, assessments, and payments, extraordinary as well as ordinary, which shall during the term hereby granted, and during any renewal thereof, be imposed or grow due and become payable out of or for the said demised premises, or any part thereof." There is also a clause restricting the assignment of the lease; also one against maintaining any nuisance on the premises. The indenture also contained a covenant on the party of Kelly within two years from the commencement of the term to "erect and build, or cause to be erected and built, on the premises hereby demised, a good and substantial building for hotel purposes, at least two stories high, upon plans to be approved by the lessors." There is a further clause providing that if Kelly should build such a hotel, and otherwise perform his covenants, then the lessors, their successors and assigns, shall and will, at the end and expiration of the term hereby demised, grant and execute unto Kelly, his executors, administrators, or assigns, a renewal of the lease for the further term of 21 years, at a rent to be fixed by agreement or arbitration. It was further agreed that "if the lessors, at the expiration of the term of ten years, or at the expiration of any term that may be granted thereafter by any subsequent renewal, elect and choose to pay unto the party of the second part, his executors, administrators, or assigns, the value of the said hotel building, to be ascertained by arbitration, and shall actually make such payment, or tender the same, then the said Kelly, his executors, administrators, or assigns, shall deliver up the said hotel building in the same order and condition in which it was at the time of its valuation, and, all and singular, the other premises hereby demised, into the hands and possession of the parties of the first part, their successors and assigns, without fraud or delay." This indenture was duly acknowledged and recorded in the clerk's office of Hudson county on October 4, 1895. The mortgage recites the demise and description of the land contained in the indenture, and also an indebtedness from Kelly to the complainant and then proceeds "to grant bargain, sell, assign, transfer, and set over unto" the complainant the lease, "with the buildings and improvements thereon erected, together with the appurtenances, and all the estate and rights of the parties of the first part," to have and to hold, etc. Then follows the usual condition found in mortgages of real estate. Kelly took possession and erected the building in accordance with his covenant, and occupied it until his death. The defendants took possession as his executors, and occupied the premises at the filing of the bill. The defense set up in the answer and disclosed by the proofs is twofold: First that the mortgage from Kelly to the complainant was a breach of that clause in the lease which forbids an assignment and hence destroyed at once the term. The second defense relied on was that the complainant's mortgage is no more and no less than a mortgage of chattels, and hence, as it was not immediately recorded, and there was no change of possession, and it lacked the affidavit required to a chattel mortgage, it was void against creditors who became such before it was actually recorded, and that Kelly died hopelessly insolvent and owing large sums of money, most of which indebtedness was incurred prior to the recording of the mortgage, and that the executors, in the Interest of the creditors, set up that defense. By an interlocutory order made in the cause the leasehold interest with the buildings and fixtures, was sold by a master, and the contest is now over the proceeds of the sale.

John Griffin, Robert S. Hudspeth, and Henry Puster, for complainant.

M. T. Rosenberg, for defendants.

PITNEY, V. C. (after stating the facts). The position taken by the defendants, that they represent the creditors, and are entitled to set up any defense against the mortgage that creditors who became such before the recording of the mortgage could set up, is well established. Currie v. Knight 34 N. J. Eq. 485. If the mortgage would be void against creditors of Kelly if attacked by them in his lifetime, it must be held void as against his executors, to the extent at least that it will satisfy the creditors.

The point taken, that the assignment of the lease by way of mortgage was a breach of the covenant, which at once terminated the term, is rendered immaterial by a sale of the mortgaged premises. The purchaser at the sale took the risk of that question. The content here is over the proceeds of the sale.

The principal question is as to the character of the complainant's mortgage, and the effect of its record at the time and in the manner disclosed by the case; that is, as a mortgage of real estate, and not as a mortgage of chattels. The complainant contends that it was properly so recorded, and took effect from the date of the mortgage, as against all creditors. The complainant relies on the act of April 4, 1872 (P. L. p. 93; Revision 1877, p. 157; Gen. St. p. 857). The title of the act is, "A further supplement to an act entitled 'An act respecting conveyances.'" The language of the act modified by the Revision of 1877, is this: "Sec. 19. That all leases for estates in lands and tenements for life or for a term not less than two years, being duly signed, sealed and acknowledged or proved, in the manner herein prescribed for the acknowledgment or proof of deeds of conveyance, may be recorded in the same manner as such deeds may be recorded; and such record shall be notice to subsequent judgment creditors, purchasers, lessees and mortgagees." Section 20 provides "that the estate of any such lessee in the demised premises, the lease whereof shall have been recorded in manner aforesaid, shall be liable to sale under a judgment or decree, in like manner, only as estates of freehold are now liable to be sold thereunder." Section 21 provides "that any assignment of such lease so recorded, such assignment being signed, sealed, acknowledged or proved in...