Magie v. Reynolds

• Decision Date: 13 March 1893
• Citation: 51 N.J.E. 113,26 A. 150
• Parties: MAGIE v. REYNOLDS et al.
• Court: New Jersey Court of Chancery

26 A. 150

51 N.J.E. 113

MAGIE

v. REYNOLDS et al.

Court of Chancery of New Jersey.

March 13, 1893.

(Syllabus by the Court.)

Bill by Abby M. Magie against Edward M. Reynolds and others to foreclose a mortgage. Judgment that the mortgage be canceled and delivered to defendants Reynolds and wife, and plaintiff have judgment on amended pleadings for the amount of the mortgage debt against defendant Bloss.

Edward S. Atwater, for complainant.

William B. Guild, for defendant Bloss.

Campbell & De Baun, for defendants Reynolds and wife. C.

W. Berdan, for defendant Mrs. Day.

PITNEY, V. C. This is, in form, a bill to foreclose a mortgage. The mortgagors, Reynolds and wife, set up fraud in its procurement, and by cross bill ask that it be delivered up to be canceled. The ultimate question in the cause is, which of two innocent parties—the complainant on the one side, or Reynolds and his wife on the other—shall suffer by the fraudulent practices of a third party? The mortgage thought to be foreclosed was executed by the defendants Reynolds and wife to Emma A. Sumner, the wife of Perrin H. Sumner, on the 2d of January, 1889. It was assigned by Mrs. Sumner to the defendant Benjamin O. Bloss on the 18th of December, 1889, and again by Bloss to the complainant on the 15th of March, 1890. The mortgage covers a small farm and dwelling situate at May wood, near Hackensack, Bergen county, N. J. The particulars of the fraud set up in the answer and cross bill are as follows: That Reynolds was the owner of the farm above mentioned, upon which there was an undeveloped brown stone quarry, and, being desirous to have it developed, he applied to Sumner to assist him therein, and that Sumner undertook to do so, but that he required some security to be given to investors whom he might interest in it that it would turn out upon experiment that there was a sufficient quantity of marketable stone upon the premises, and for that purpose induced the defendants to execute the bond and mortgage in question; and they allege that in point of fact they received no consideration whatever for the mortgage, except as follows: That Sumner, upon their objecting to giving a mortgage under the circumstances and for the purpose just stated, proposed to give them a counter indemnity in the shape of a one-tenth interest in a farm containing 525 acres, situate at Manor, in Suffolk county, L. I., which Sumner then pretended to own, and stated to them that it was worth $50,000, and that, relying upon the representations, statements, and promises of Sumner, they took a deed from Sumner for a one-tenth interest in the said tract of land. That afterwards Sumner informed them that he had agreed to sell his interest in the farm to Bloss, and that, in order to enable him to make a conveyance, it was necessary that the defendants should return to him, Sumner, the deed which they had received from him, and which had not been recorded, and that for such surrender Sumner would give them a consideration in valuable gold mining stock, from which could at once be realized a sum sufficient to operate the quarry. Believing these representations. they surrendered the deed to Sumner, and thereupon received a quantity of gold mining stock; and by way of making them believe that the stock was valuable, Bloss loaned them $50 on a promissory note of Reynolds, and took as collateral one of the certificates of stock, representing 25 shares of the stock in a gold mine. That the said shares of stock turned out to be utterly valueless, and that Sumner promised to return the bond and mortgage and deliver it up to be canceled. The replication to this cross hill sets up that the mortgage was given for a full consideration, namely, the conveyance of the interest in the Long Island farm, and denies the allegations that the mortgage and conveyance were made by way of indemnity and counter indemnity.

The facts are that Reynolds was a retired officer in the marine service of the United States, having attained the rank of captain, and reached the age of about 65 years, and having been dropped or discharged from the service, and being very poor and without means of support, and having no property except the farm in question. He was a man of no business training or capacity whatever, of slender intellect, and entirely unfit to take care of himself in dealing with a shrewd man of the world. His wife was some years his junior, with the ordinary capacity of an American wife, and without any experience in business. They were very poor, and the captain was anxious to obtain employment and occupation, and also to derive some income from the supposed stone quarry on his farm. Some time prior to the 1st of January, 1889, one Willis was the owner of the farm in question on Long Island, which was called the "Horn Tavern Farm," subject to a mortgage of $8,000, held by the Mutual Life insurance Company of New York, and some judgments against Willis, and arrears of taxes, etc., and, being desirous to sell the farm, he applied to Sumner to do it, and agreed to give him one third of all he could get over and above the incumbrances, and that Sumner procured a Dr. Marquet to take a one-third interest in it at a price actually paid of over $2,000, and Sumner received from Willis a conveyance for the other two thirds to his son, Arthur E. Sumner, who subsequently, in December, 1888, conveyed it to Emma A. Sumner, so that Emma A. Sumner, on the last of December, 1888, had standing in her the title to two thirds of this Long Island farm. I am satisfied from the evidence of Dr. Marquet and Bloss and the circumstances that the farm was worth nothing above the incumbrances. Such being the situation, in the middle or towards the last of the year 1888 Reynolds was introduced to Mr. Sumner, who had an office in Broadway, New York, and solicited his aid in developing the stone quarry. Sumner immediately set about procuring a mortgage from the captain and his wife on their farm, and, according to their story, first tried to trade them some coal lands and other matters of that kind, and finally, as they both swear, he induced them to they him the mortgage in question, substantially under the circum stances and for the reasons set out in their answer and cross bill, viz. as an indemnity to secure persons taking an interest in the stone quarry, and that the conveyance of the tenth interest in the Long Island farm was given as a security to them against the mortgage. This evidence on their part is denied by Sumner, and, in point of fact, on the 31st of December, 1888, Capt. Reynolds and wife and Arthur E. Sumner entered into a contract in writing, which is made up partly of print and partly of manuscript, and is full of interlineations and erasures, so that it is quite difficult to decipher, and some of the interlineations are in a different ink from the other part of the writing. None of them are noted, so that it is impossible now to determine from the face of the paper what parts were actually written in it at the time it was signed. The purport of it is that Capt. Reynolds and wife, in consideration of one dollar, agreed to grant and convey unto Arthur E. Sumner a first mortgage and bond on the Bergen county farm, to be due in five years from the date, to bear interest at the rate of 6 per cent. per annum, semiannually; and Sumner agreed to grant and convey unto Reynolds and wife an undivided one-tenth interest in and to the Long Island farm by quitclaim deed, but, in case the land in the mean time should be deeded to a company, Reynolds was to have one eighth of the surplus stock of the company after the treasury stock had been deducted. It is stated in the contract that the entire tract of land was subject to a mortgage of $6,000, held by the Mutual Life Insurance Company of New York, and other liens, judgments, and taxes, and that the judgments are to be taken care of and paid by L. Marquet as per his agreement; that the deed or the stock in the company to be formed to develop the Long Island farm were to be delivered on or about the 25th of June, 1889, but the mortgage was to be delivered directly, the mortgage to be made to Sumner; or to any one he might designate; and there is an interlineation in a different ink to the effect that no warranty or representations have been made by P. H. Sumner or any one as to the value of said farm. Reynolds and wife admit their signature to this paper, but they have no recollection of having signed it, or of knowing the contents or effect of it; and it is manifest that at this time, and for a considerable period afterwards, they had perfect confidence in Sumner, and would have signed anything he asked them."

It will be observed that at the time this contract was entered into with Arthur E. Sumner the title to the premises was not in him, but in his mother. On the 20th of February, 1889, Mr. and Mrs. Reynolds signed another agreement, in which they agreed to accept one tenth of the surplus of the stock of a company to be formed after the stock to be put into the treasury of the company has been deducted in payment in full of the mortgage of $5,000above stated. The contract does not state what the company was to be formed for, but the allegation and inference is that it was to be formed to develop the Long Island farm, to turn it into a cranberry farm. On the 26th of March, 1889, Mr. and Mrs. Sumner executed a deed to Reynolds and wife, in consideration of one dollar and other considerations, for the one-tenth part of the Long Island farm, "subject to a mortgage given to the Mutual Life Insurance Company of New York to secure the payment of $6,000 and interest, and also subject to certain judgments now on record in said county of Suffolk." That deed was acknowledged on the same day, and delivered, but, at the request of Sumner, was not recorded until the 21st of August, 1889, on which day a suit was commenced in the supreme court of New York for Suffolk county by Willis...