Ocean County Nat. Bank v. Stillwell, 221.

• Decision Date: 10 February 1938
• Docket Number: No. 221.,221.
• Citation: 123 N.J.Eq. 337,197 A. 286
• Parties: OCEAN COUNTY NAT. BANK et al. v. STILLWELL et al.
• Court: New Jersey Supreme Court

197 A. 286

123 N.J.Eq. 337

OCEAN COUNTY NAT. BANK et al.

v. STILLWELL et al.

No. 221.

Court of Errors and Appeals of New Jersey.

February 10, 1938.

Appeal from Court of Chancery.

Suit to foreclose mortgage by the Ocean County National Bank and another, executors and trustees under the last will and testament of Herman P. Stillwell, deceased, against Joseph Stillwell and others. From a decree of dismissal, the complainants appeal.

Affirmed.

Owen C. Pearce, Manasquan, Durand, Ivins & Carton, of Asbury Park (J. Victor Carton and Robert V. Carton, both of Asbury Park, of counsel), for appellants. Harry E. Newman, of Lakewood, for respondents Arthur J. Strickland and Joseph Stillwell. E. Garfield Gifford, of Newark, for respondent Miller Lumber Co., Inc.

HEHER, Justice.

The challenged decree dismissed complainant's bill to foreclose a mortgage bearing date December 2, 1924, made by defendant Joseph Stillwell to his son, Herman P. Stillwell, purportedly given to secure payment of a bond bearing even date therewith, made by the father to the son, conditioned for the payment of $10,000 on December 2, 1925, with interest thereon at the rate of 6 per cent. per annum. The mortgage recited that the father was "justly indebted" to the son in that sum.

The bill is in the usual form. It alleges the execution and delivery of the mortgage to secure the "debt" thus evidenced by the bond, the death of Herman on January 9, 1930, testate, the conveyance of the lands on July 22, 1931, by Joseph to Arthur J. Strickland, as assignee and trustee for the benefit of his creditors, and the amount of the matured mortgage debt to be "the principal sum of $10,000.00 with interest thereon from December 2, 1929."

The original answer filed by Joseph's assignee pleaded want of consideration and the nonexistence of the claimed mortgage debt, either in the amount specified or in any sum whatsoever. A "supplemental" answer (not printed in the state of the case, but referred to therein as having been filed shortly before the final hearing) averred, by way of separate defense, that the "consideration for the mortgage * * * was a contemporary agreement that the mortgage was given to secure Herman Stillwell from any loss by reason of his delivery of certain securities to" Joseph; and that Joseph "performed the terms of said agreement and has become entitled thereunder to the surrender of said bond and mortgage, which right has now accrued to the assignee, Arthur J. Strickland." While his answer has not been printed, the state of the case shows that Joseph also answered, denying the execution and delivery of the bond and averring total failure of consideration; and, at the final hearing, his counsel asked for and was granted leave "to include" him "in the answer" filed by his assignee.

The Miller Lumber Company, Inc., is the holder of a mortgage covering the same premises, recorded subsequent to complainants' mortgage. By a stipulation it is shown that this defendant also answered the bill of complaint. The answer is not printed in the state of the case.

On the final hearing, complainants proved the execution of the bond and mortgage (they were introduced in evidence), the death of Herman and the probate of his will, the finding of the bond and mortgage —with no endorsement of payment of either principal or interest —in a safe deposit box in complainant bank rented in the names of Joseph and Herman Stillwell, the nonpayment of either principal or interest to the executors and trustees, and rested. The answering defendants thereupon proved —and introduced in evidence —an agreement between Herman and Joseph, signed by the former, and delivered contemporaneously with the bond and mortgage, reciting that Herman "has furnished" Joseph "with certain valuable securities of the value of Ten Thousand Dollars or more, for the use of" Joseph "in and about his business," and the "desire and intention of" Joseph "to protect" Herman "from any loss by reason thereof," and binding Joseph to execute and deliver to Herman, "upon the execution hereof," a bond and mortgage in the sum of $10,000, payable in one year, with interest at the rate of 6 per cent., covering lands in the borough of Mantoloking (and described in the mortgage), "as security for the return of the said securities, and for the purpose of protecting" Herman "from any loss in connection therewith." Herman therein undertook to "safely keep and hold the said bond and mortgage, for the purpose thereof, * * *" and to "promptly surrender the same to" Joseph, "upon the return of the said securities, * * * within a reasonable time; otherwise the said bond and mortgage shall become the property of" Herman "absolutely."

Complainants invoked section 4 of the Evidence Act, 2 Comp.St.1910, p. 2218, § 4 to exclude testimony by Joseph —proffered by the answering defendants —relating to pertinent conversations and transactions with his deceased son. The witness was, however, permitted to testify that, at the time of his son's death, he did not "hold any securities —valuable securities or otherwise, that formerly belonged to Herman"; and the learned Vice Chancellor, in an oral deliverance, ruled that, inasmuch as the mortgage was given to secure Herman "against the non-return of the securities" loaned by him to his father, and the proof was that, at the time of Herman's death, Joseph "had no such securities in his possession," the necessary inference was that "whatever securities Herman had entrusted to him prior to that time had been returned to him," and there was therefore "nothing due on the mortgage."

The premise does not support the conclusion. Non sequitur. Joseph's lack of possession of the securities is not proof of their return to Herman. The very purpose of the bond and mortgage, as disclosed by the underlying agreement, was to protect Herman from loss resulting from the "use" of the securities by Joseph "in and about his business"; and it goes without saying that Joseph would also be answerable for his conversion of the securities or the consequences of any other wrongful act relating thereto.

Yet we think the decree should be sustained. In a foreclosure suit the burden of proof of payment or other satisfaction of the mortgage ordinarily rests upon him who asserts it by way of defense. But that rule has its reasonable exceptions; and it is not, for reasons presently to be stated, applicable in the peculiar circumstances of the case in hand. It is grounded in the doctrine that, in the fair apportionment of the burden of proof, considerations of fairness dictate that a specific logical and reasonable inference from a particular fact, or from particular evidence, should be classified by rule of law as a presumption, i. e., its subject matter considered as a fact established by inference until disproved by evidence or a stronger presumption, so as to place upon the adversary party, as a legal consequence, the duty of going forward with the evidence on pain of failure. It is this legal consequence of a presumption that distinguishes it from a mere inference.

Thus it is that, in a foreclosure suit by the legal representative of a deceased holder of a mortgage, the deceased's possession of the bond (or other obligation secured) and mortgage at the time of his death is deemed prima facie evidence...