Opinion
Decided May 14th, 1936.
1. Three criteria exist for determining whether an absolute conveyance was intended as a mortgage: (1) Was there a debt which was not satisfied by the conveyance which survived so that the grantee might have sued on it? (2) Was the price paid considerably less than the value of the property granted? (3) What was the conduct of the parties with regard to the property after the date of the deed?
2. A deed is evidential as to the date of the acknowledgment, and as to the contents of the instrument itself, and must be accepted unless there is strong evidence to the contrary. There is no such evidence in this case.
3. Defendant had a right to prefer complainant, a bona fide creditor with a claim for legal services, to other creditors. The property conveyed to complainant by way of security, held, subject to the lien of complainant's claim.
4. Where there are two tracts, only one should be sold where the liens can be satisfied therefrom.
On appeal from an order of the court of chancery advised by Vice-Chancellor Egan, who delivered the following opinion orally:
"This case is simplified by the statement of one of the counsel in this case. On the stand he said he did not take the entire property and that the deed was taken for security. In the case of Titus v. Wallick, 114 N.J. Eq. 171, the court there said there are three criteria for determining whether an absolute conveyance was intended as a mortgage: (1) Was there a debt which was not satisfied by the conveyance but which survived so that the grantee might have sued upon it? (2) Was the price paid considerably less than the value of the property granted? (3) What was the conduct of the parties with regard to the property after the date of the deed? Mr. Morten testified that this property was given as security for a debt of $1,050 due in January, 1933. Now, the deed, of course, is evidential as to the date of the acknowledgment, and as to the contents of the instrument itself, and must be accepted unless there is strong evidence to the contrary. The evidence to the contrary appears to have been a record kept by one of the officials of the Hudson county jail which is presumed to contain entries of the appearance of counsel who visit their clients incarcerated in the Hudson county jail, and the record in that book as of January 9th, 1933, indicates that no counsel visited the defendant Smith who was at that time incarcerated in the jail. That is the only proof that was offered against the deed. Now, in the case of Vreeland v. Jacobus, 19 N.J. Eq. 231, the syllabus is as follows: `A conveyance of real estate before sequestration issued, although after the decree upon which it is founded, is valid, in the absence of any proof of mala fides.' The court further, on page 34, says: `It is not reasonable that a husband, who is directed to pay his wife a certain alimony should not be allowed to use his property to pay or secure his just debts, or to furnish himself with the necessaries of life, until she has, in some way provided by law, made her claim a legal lien upon his property. The alimony should be out of the property of her husband, and not out of that of his creditors.' And that case further says: `A purchaser for a valuable consideration, before the sequestration, is free; for though a decree as to some purposes be equal with a judgment, yet, it is never so till a sequestration awarded, for, till then, neither lands nor goods are bound.' In the case of Carluccio v. Winter, 108 N.J. Eq. 174, the principle just enunciated is enunciated in that particular case as well as many other cases of record. So it has been established that the complainant in this case was a creditor and had rendered service to the defendant Smith for legal services, and the complainant Melosh, Morten Melosh being a bona fide creditor, Smith therefore had a perfect right to prefer them to other creditors. So I think that he was within his rights in preferring them and, I think, complainants are entitled to the relief they seek, and the property shall be subject to the liens mentioned in the bill of complaint, namely, the claim of $1,050 on the part of complainants as well as the amounts mentioned in the abstract of the decree which has been offered in evidence, C-4. I don't know that both properties should be disposed of if the liens can be satisfied from one piece of property. I think they approximate seventeen or eighteen hundred dollars. It may be a little more.
"Mr. Morten: I think three or four years' taxes, too. I am not sure of that.
"The court: I suppose then the only way that the liens can be satisfied is by disposing of either piece to satisfy the claims, or both pieces. The property, I think, should be sold under the direction of a special master and out of the proceeds of sale to pay the lien of complainants and the other liens that follow. Of course, the sale is subject to the dower of Mary Smith, one of the defendants. I don't think I will allow any costs or counsel fees. I will allow costs but no counsel fee.
"Mr. Morten: I was not even going to ask for them. I was going to ask your honor's thought as to the sale by a master. That means master's fees. If they can come in ____
"The court: I will qualify that. Whatever will save expense to these people I would be glad to do it. Are there any recommendations by counsel as to that?
"Mr. Morten: If they will notify us within ten days we will take no steps to have the property sold. If they don't then we will have to do it.
"The court: Suppose you make it twenty days.
"Mr. Morten: All right.
"The court: I will sign an order to that effect because I don't think you should be hindered."
Mr. Nathan Baker, for the appellants.
Mr. Louis G. Morten, for the respondents.
The order appealed from will be affirmed, for the reasons stated in the opinion delivered by Vice-Chancellor Egan in the court of chancery. For affirmance — LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, JJ. 11.
For reversal — None.