The Rutherford National Bank v. H. R. Bogle & Company

• Decision Date: 27 November 1933
• Citation: 169 A. 180,114 N.J.Eq. 571
• Court: New Jersey Court of Chancery
• Parties: THE RUTHERFORD NATIONAL BANK, complainant, v. H. R. BOGLE & COMPANY et al., defendants

169 A. 180

RUTHERFORD NAT. BANK

v. H. R. BOGLE & CO. et al.

Court of Chancery of New Jersey.

Nov. 27, 1933.

Syllabus by the Court.

1.To agree to dedicate property to a particular purpose or debt is to create an equitable lien thereon in favor of him for whom such dedication is made.

2.If an intent to give, charge, or pledge property as security for an obligation appears, and such property is sufficiently described or identified, an equitable lien or mortgage will arise thereon.

3.An agreement to give a mortgage on specified property will create an equitable mortgage thereon, notwithstanding the fact that the promisor may not have been the owner of such property at the time of his making the said agreement.

4.Payment of the monetary consideration or complete performance by one who seeks the enforcement of an agreement to give a mortgage is a sufficient part performance to remove it from the bar of the statute of frauds.

5.An equitable lien or mortgage once created is not waived, expressly or impliedly, by the promisor giving, and the promisee receiving, a formal mortgage, which by reason of fraud or mistake is ineffectual in giving the specific lien which the former thereby intended to give and the latter thereby intended to receive, nor will such equitable lien or mortgage be merged in any such instrument.

6.The general lien of a judgment creditor upon his debtor's lands is subject to all such equities as existed against them in favor of third persons when such judgment was recovered, and a court of equity will so control the legal lien of such judgment as to restrict and limit it merely to the actual interest of the judgment debtor in the property, so as to fully protect and preserve the rights of persons having prior equitable liens or interests in such property.

7.A subsequent legal title to or lien upon land, in order to prevail over a prior equitable title or lien, must not only have been acquired without notice of the prior equity, but must be founded upon a present valuable consideration.

Suit by the Rutherford National Bank against H. R. Bogle & Co. and others.

Decree for complainant.

Conkiing, Smith & Towe, of Rutherford, for complainant.

John Milton, of Jersey City, and William H. J. Ely, of Rutherford, for defendants.

LEWIS, Vice Chancellor.

The issues here presented are: Has complainant an equitable mortgage upon the property in question; and, if so, is that mortgage inferior or superior to the judgment lien of defendantWilliam H. Kelley, commissioner of banking and insurance, in possession of the property and assets of Lyndhurst Trust Company(hereinafter designated as "Commissioner")?

Succinctly stated, the facts, as stipulated, are: On August 5, 1926, Charles Smithson and his wife, to secure the payment of $8,500, executed their bond and mortgage covering the property in question to Lyndhurst Gardens, Inc., which the latter, on November 11, 1926, assigned to defendant H. R., Bogle & Co.(hereinafter called "Bogle"), who, on November 19, 1926, assigned them to complainant as collateral security for its indebtedness to the latter.

The provisions of this bond and mortgage having been defaulted in, foreclosure proceedings were instituted by complainant and Bogle on January 29, 1931, which finally resulted in the property being advertised for sale on June 24, 1931, by the sheriff of Bergen county.

Prior to said sale date, complainant and Bogle agreed that, in the event there were no bidders at the sale, or in case the mortgaged premises failed to bring the sum of $8,847.08, then Bogle should purchase the said premises and secure complainant's interest therein by executing and delivering to the latter a mortgage thereon in the sum of $8,500.No bidders appeared at the sale, and, in accordance with said agreement, Bogle purchased said premises.On July 7, 1931, and before the sheriff had delivered his deed to Bogle, this court, on Smithson's petition to redeem the premises in question, restrained the sheriff from delivering his deed therefor to Bogle.After several hearings, the petitioner's solicitors withdrew their objections to the deed being delivered by the sheriff to Bogle, and thereupon the petition was dismissed and the restraint vacated on March 7, 1932.

Thereafter, on March 11, 1932, at 2:37 o'clock in the afternoon, a judgment was entered in the Bergen county circuit court for the sum of $2,408.82 against Bogle and in favor of the commissioner's predecessor in office, for whom Smithson's solicitors appeared as attorneys, which judgment still remains uncanceled and unsatisfied of record.On this very same day, Bogle, pursuant to its previous agreement with complainant, executed and delivered to the latter a mortgage on the property, which, together with the sheriff's deed to Bogle, were recorded simultaneously in the Bergen county clerk's office on March 11, 1932, at 3:18 o'clock in the afternoon, or forty-one minutes after the entry of the judgment against Bogle.

Upon these facts, the authority of 3 Comp. St. 1910, p. 3414, § 22;2 Comp. St. 1910, p. 1553, § 54, and the cases of Sharp v. Shea, 32 N. J. Eq. 65;Morris v. White, 36 N. J. Eq. 324;Capital Circle v. Schmitt, 84 N. J. Eq. 95, 92 A. 596;Gawrillow v. Rutkowski, 104 N. J. Eq. 329, 145 A. 544;Cubberly v. Homecrafters, Inc., 106 N. J. Eq. 470, 151 A. 281;Hunt v. Swayze, 55 N. J. Law, 33, 25 A. 850;Hodge's Ex'rs v. Amerman, 40 N. J. Eq. 99, 2 A. 257;Merchants & Manufacturers Trust Co. v. Rollins, 102 N. J. Eq. 460, 141 A. 265;Majewski v. Greenberg, 101 N. J. Eq. 134, 136 A. 749;Westervelt v. Voorhis, 42 N. J. Eq. 179, 6 A. 665;Howell v. Brewer(N. J. Err. & App.)5 A. 137, it is contended on behalf of the commissioner that the judgment which he holds is prior in lien to that of complainant's lien or mortgage.But a reading of the statutes and cases cited and relied upon by the commissioner discloses that they govern and apply only to cases wherein the controversy is between subsequent and prior bona fide purchasers, lienors, or judgment creditors, where the former are first of record, or where, as against such subsequent purchasers, lienors, or judgment creditors, the prior equitable owner or lienor does not occupy the status of a bona fide purchaser.

But no such facts or issues are here involved.Complainant here contends, and the commissioner denies, that it, by virtue of its agreement with Bogle, has an equitable mortgage on the property in question, and as such occupies the position of a bona fide purchaser as against the commissioner.

The whole doctrine of equitable liens or mortgages is founded upon that cardinal maxim of equity which regards as done that which has been agreed to be, and ought to have been, done.To dedicate property, or to agree to do so, to a particular purpose or debt, is regarded in equity as creating an equitable lien thereon in favor of him for whom such dedication is made.This whole some equitable principle is one of wide, if not universal, recognition and application.Dean v. Anderson, 34 N. J. Eq. 496;Cummings v. Jackson, 55 N. J. Eq. 805, 38 A. 763;Clark v. Van Cleef, 75 N. J. Eq. 152, 71 A. 260;Payne v. Wilson, 74 N. Y. 348;Chase v. Peck, 21 N. Y. 581;Ketchum v. St Louis, 101 U. S. 306, 25 L. Ed. 999;Walker v. Brown, 165 U. S. 654, 17 S. Ct. 453, 41 L. Ed. 865.

The form which an agreement shall take in order to create an equitable lien or mortgage is quite immaterial, for equity looks at the final intent and purpose rather than at the form.If an intent to give, charge, or pledge property, real or personal, as security for an obligation, appears, and the property or thing intended to be given, charged, or pledged is sufficiently described or identified, then the equitable lien or mortgage will follow as of course.Robinson v. Urquhart, 12 N. J. Eq. 515;Griffin v. Griffin, 18 N. J. Eq. 104;Brewer v. Marshall, 19 N. J. Eq. 537, 97 Am. Dec. 679;Martin v. Bowen, 51 N. J. Eq. 452, 26 A. 823;Oliva v. Bunaforza, 31 N. J. Eq. 395;Ketchum v. St Louis, 101 U. S. 306, 25 L. Ed. 999;Biebinger v. Continental Bank, 99 U. S. 143, 25 L. Ed. 271;Richardson v. Wren, 11 Ariz. 395, 95 P. 124, 16 L. R. A. (N. S.) 190;Hamilton v. Hamilton, 162 Ind. 430, 70 N. E. 535; Pinch v. Anthony, 8 Allen (Mass.) 536;Atlantic Trust Co. v. Holdsworth, 167 N. Y. 532, 60 N. E. 1106;Sprague v. Cochran, 144 N. Y. 104, 38 N. E. 1000;Coman v. Lakey, 80 N. Y. 345;Payne v. Wilson, 74 N. Y. 348;Chase v. Peck, 21 N. Y. 581.

In conformity with this equitable principle, it has been held that a provision in a will charging lands with the payment of certain bequests or legacies imposes an equitable lien thereon, Grode v. Van Valen, 25 N. J. Eq. 95;Horning v. Wiederspalen, 28 N. J. Eq. 387;Blauvelt v. Van Winkle, 29 N. J. Eq. 111; that an agreement to give a mortgage on one's share of his father's estate under a will when a division is made will create an equitable mortgage thereon, Lynch v. Utica Ins. Co., 18 Wend. (N. Y.) 236; and that an agreement to give a mortgage upon a specified piece of property will likewise give rise to an equitable mortgage thereon, Dean v. Anderson, 34 N. J. Eq. 496;Clark v. Van Cleef, 75 N. J. Eq. 152, 71 A. 260;Bridgeport Electric & Ice Co. v. Meader (C. C. A.)72 F. 115;Augusta Trust Co. v. Federal Trust Co. (C. C. A.)153 F. 157;In re Farmers' Supply Co. (D. C.)170 F. 502.

Nor will such an equitable lien or mortgage be precluded from coming into existence because the owner of the property affected thereby was not such when he made the promise or agreement engendering such equitable lien.Dean v. Anderson, supra;Clark v. Van Cleef, supra;Lynch v. Utica insurance Co., supra;Husted v. Ingraham, 75 N Y. 251;Hovey v. Elliott, 118 N. Y. 124, 23 N. E. 475;Holroyd v. Marshall, 10 H. L. Cas. 194.

Inasmuch as a mortgage is a conveyance of an interest in real property within the provisions of our statute of frauds (2 Comp., St. 1910, p. 2612, § 5), ...