McMurtry v. Bowers

• Decision Date: 01 March 1920
• Docket Number: No. 53.,53.
• Parties: McMURTRY v. BOWERS et al.
• Court: New Jersey Supreme Court

109 A. 361

McMURTRY

v. BOWERS et al.

No. 53.

Court of Errors and Appeals of New Jersey.

March 1, 1920.

(Syllabus by the Court.)

Bergen, Minturn, Kalisch, White, and Heppenheimer, JJ., dissenting.

Appeal from Chancery Court.

Bill by Catherine Bowers against Annie Bowers, Henry Bowers, her husband, and one Rose and one Prout, and the Newark Trust Company, which counterclaimed and sought foreclosure, in which after complainant's death pending litigation Harry McMurtry, her executor, was substituted. Decree for defendants, dismissing the bill, and decreeing foreclosure, and the executor appeals. Reversed as to defendant Prout, and decree entered for complainant against him, and reversed as to defendants Rose and Annie Bowers and husband, with an award of costs against them, and affirmed as to the Newark Trust Company.

Edward P. Johnson, Jr., and Hugh K. Gaston, both of Somerville, for appellant

Allen W. Rose, William Prout, and George E. Clymer, both of Newark, for respondents Bowers.

Raymond, Clancy, Marsh & Ellis, of Newark, for respondent Newark Trust Co.

PARKER, J. The basic facts are fully stated in the opinion of the Vice Chancellor, but must also be dealt with here. The bill was an attack by a judgment and execution creditor named Catherine Bowers, upon a mortgage made by the defendant Annie Bowers and her husband, Henry, as in fraud of complainant's rights. Catherine died pending the litigation, and her executor was substituted.

The mortgage in question was made to the defendant Rose, whom the Vice Chancellor found to have been at the time a bona fide creditor, not of Annie, but of her husband, Henry, and as he also found, not as security for, but in payment of, Henry's debt. The Vice Chancellor also found as a fact that Rose at the time of taking the mortgage as such payment was unaware of the fact that Annie owed the complainant; and, while he conceded that, if Rose had known that Annie was already indebted, the good faith of the transaction would have been very questionable, he upheld it on the express finding that Rose did not know of the prior indebtedness. The mortgage, being thus adjudged good in Rose's hands, was likewise held good in the hands of respondent Prout as assignee, although Prout knew all about Annie's indebtedness, the fact being that when the mortgage was made, Annie had been sued by Catherine Bowers for this debt in the Somerset circuit, had employed Prout to file a plea, which he did, that the mortgage was made while the cause was at issue and awaiting trial, and that afterwards, when the cause was called for trial, Annie defaulted and Catherine had judgment. In this aspect the Vice Chancellor relied on the rule that a bona fide purchaser for value without notice of fraud can transfer a good title to a subsequent purchaser aware of the fraud.

Prout did not record his assignment for some seven years, and at the end of that period used the mortgage as collateral security in borrowing from the respondent Newark Trust Company. That company concededly was unaware of any equity of Catherine Bowers. By this time, it is true, she had well-nigh exhausted all purely legal remedies for the recovery of her debt. She had obtained judgment, issued execution, and caused a levy to be made on the property covered by the mortgage, which consisted of Annie's undivided interest in land subject to an unassigned dower right, and of which the dowress was in possession, and had bought in Annie's interest at a sale under her execution, but, of course, could not enter into possession as...