Opinion
09-04-1903
SEELEY v. ADAMS et al.
William I. Garrison, for complainant. Thompson & Cole, for defendants.
Suit by Silas S. Seeley against I. G. Adams and another. Bill dismissed.
William I. Garrison, for complainant.
Thompson & Cole, for defendants.
REED, V. C. The purpose of this suit is to get a decree that Israel G. Adams and Clement J. Adams bought in a property owned by the complainant, and which was sold at a foreclosure sale, under an agreement that said defendants should hold the said property as security for moneys owed them by the complainant, and that the complainant should have the right to redeem the property by paying the amounts paid by the defendants for and on account of said property, together with the amount owing to defendants and secured by mortgage upon the same at the time of the sale.
The complainant, in October, 1898, was the owner of a piece of ground on the corner of Arctic and Connecticut avenues, in Atlantic City. This property was incumbered by a first mortgage of $15,000 and interest, held by Loeb and Straus, executors of Daniel Straus, deceased. This mortgage will be styled the "Straus mortgage." There was a second mortgage, held by Leo Loeb, for $1,100, which will be styled the "Loeb mortgage." There seems also to have been two judgments—one the Harrity judgment, for $95.45, and the other the Dunham judgment, for $40.77—the liens of which were antecedent to the Loeb mortgage. Then there was a mortgage held by Israel G. Adams, dated January 28. 1897, for $3,501, and still another mortgage held by Mr. Adams, dated January 24, 1898, for $1,033.25. Somewhere between the Loeb mortgage and the last Adams mortgage, but exactly when does not appear, the lien of three judgments were fastened upon the property. One was for $800 in a suit by the Atlantic Lumber Company against Mr. Seeley; another a judgment for $203.97, owned by Daniel K. Donnelly; and another for $859.50, owned by George W. Coles.
The bill sets out that Israel G. Adams, a real estate agent, had been the financial agent of the complainant, and as such had collected rents from the cottages upon the property, and had paid creditors, and distributed the money received in various ways. He had also secured loans for the complainant. The bill charges that Mr. Adams permitted the interest upon the Loeb mortgage to remain unpaid, which induced Loeb to file a bill to foreclose that mortgage; that Adams promised complainant that he would buy in the property at the foreclosure sale, and hold the same for the complainant, or such member of his family as should be named by him, and that he (the defendant) would negotiate a mortgage upon the premises sufficient to cover the purchase price, together with the unsecured indebtedness of the complainant to Adams; and that upon the making of said mortgage Adams should convey the property to the complainant or his appointee. It charges that Adams bought in the property, and thereafter refused to recognize his agreement with the complainant, but instead claimed to hold the property as absolute owner. Such an agreement Mr. Adams denies.
The admitted facts are these: The defendant Israel G. Adams is a real estate agent in business in Atlantic City. He was in business with Clement J. Adams. He had negotiated the transaction which resulted in placing the Straus mortgage upon the Seeley property. He had also placed the Loeb mortgage upon the same property. This mortgage, Mr. Adams said, was originally made to a Mr. Wolf, and Mr. Adams agreed with Mr. Wolf that he (Wolf) should lose nothing by making the loan. Mr. Wolf having died, the mortgage came into the hands of Mr. Loeb as executor. Mr. Adams also indorsed the notes of Mr. Seeley, and to secure him against liability on account of such indorsements the two mortgages already mentioned were made to Mr. Adams. Mr. Adams also collected the rents from the cottages at a commission of 5 per cent. and paid them out on account of interest upon the incumbrances upon the property. In 1899, Mr. Loeb, the interest upon his mortgages being unpaid, began a suit to foreclose his mortgage. At the sale the property was bought in by Mr. Adams' solicitor, and title was taken in his own name. The sale occurred March 20, 1899, and the sheriff's deed was executed April 3d following. There was a double store and four cottages on the plot. Mr. Seeley had occupied the largest cottage and the store before the sale. After the sale he continued to occupy the cottage and the store. But he occupied the store under a lease made to him by Mr. Adams soon after sale for the term of one year at the rent of $600. The cottage was occupied, Mr. Adams says, under an agreement that Mr. Seeley should stay in it until they could get a tenant, with the promise that he (Mr. Seeley) should move out as soon as a tenant could be procured. In 1902 Mr. Seeley procured a tenant, to whom he rented the cottage for $400 for the season, receiving $100 down. Mr. Adams, as soon as he learned of this transaction, demanded the rent, and, according to Mr. Adams' testimony, Mr. Seeley refused to turn over the $100 unless it was understood that he (Mr. Seeley) should go back into possession in September. An action of ejectment was then brought by Mr. Adams, which ended in the dispossession of Mr. Seeley on January 18, 1902. Previous to this summary proceedings were instituted in the district court of Atlantic City to dispossess Mr. Seeley of the store for nonpayment of rent according to the terms of his lease, and he was dispossessed on June 4, 1901.
The ground upon which a purchaser at a judicial sale can be compelled to specifically perform a parol agreement to buy in and hold property for another is entirely settled. It is settled that the complainant cannot rest alone upon such a promise if the contract is denied, or the statute of frauds is invoked by the defendant. To entitle a complainant to relief, it must be upon the ground of fraud or oppression on the part of the purchaser, by means of which he has obtained the property of the debtor at an inadequate price under the assurance of a contract to reconvey the property to him, or to hold same subject to future redemption. Merritt v. Brown, 21 N. J. Eq. 401; Walker v. Hill's Ex'rs, 2 N. J. Eq. 513. It is obvious that the policy which supports the stability of judicial sales requires that such a parol agreement should be proved in clear and unmistakable terms. I have no doubt that there was a colloquy between Mr. Seeley and Mr. Adams respecting the purchase of this property. Mr. Adams says that he had the property bought in to protect himself as the holder of mortgages subsequent to the one under foreclosure. He admits that all he wished to get out of the property was the amount which the property had cost him, together with the amount which Mr. Seeley owed him. I think it very likely that the possibility of placing a mortgage upon the property large enough to pay off the other incumbrances, including those of Mr. Adams, was discussed. It is, however, quite clear that a mortgage of the amount required could not be placed upon the property. As already remarked, there was upon the property a mortgage for $15,000. Then there were the Harrity and Dunham judgments, and then the Loeb mortgage of $1,100. The foreclosure sale cut out the subsequent incumbrance. Of these incumbrances there were two mortgages owing to Adams. The amount due to Mr. Adams for the moneys paid on account of prior incumbrances and notes afterwards paid by him was $7,824.45. This amount, as I understand it, includes interest paid upon the Straus mortgage. The amount to be paid, therefore, out of the mortgage to be placed was at least $22,824.45. But, to make it possible to reconvey the property to Mr. Seeley, so that it in his hands would be free from incumbrances, it would have been necessary to pay the Donnelly, the Coles, and the Atlantic Lumber Company judgments. There are incidentally mentioned other judgments subsequent to the I. G. Adams mortgages. Unless these were paid, they would, of course, again become a lien upon the property the moment it was conveyed to Mr. Seeley. If the arrangement contemplated the conveyance back to Mr. Seeley himself, the amount to be raised by the mortgage would greatly exceed the sum already mentioned. If the arrangement was to convey to some other one than Mr. Seeley, but for his benefit, the arrangement would seem to be voidable as a fraud upon his creditors. Regardless of any judgments subsequent to the Adams mortgage, the amount required to be raised is stated to be $24,466.51, or, eliminating the Donnelly judgment, which Mr. Seeley says he paid, the amount is $24,252.54. Now, the value of the property was stated in a certificate signed by Mr. Adams at $35,000, but that this was far above the market value is shown by the bid at the foreclosure sale, by the fact that no one has been able to turn the property to profitable account for $24,446.51, and by the fact that it has been sold since for much less than $35,000. Mr. Weisenthal thinks that the property was worth $28,000. In April or May, 1892, a fire occurred, which injured the property, and Mr. Adams received $5,470.85 insurance money. In May of the present year he sold the property for an express consideration of $23,000. He says he received for the consideration an interest in a second and third mortgage, and that the amount he would realize would depend on what he got out of these mortgages. Apart from the insurance money received, it seems that the receipts from the property have been insufficient to pay the interest upon the incumbrances, the taxes, and the expenses of reparation, etc. Mr. Seeley occupied the store and the largest cottage until evicted therefrom, leaving three other rentable cottages. The receipts from the property from April, 1899, to June 15, 1903, were $4,624.36, and the expenses, which include interest paid, taxes, insurance premiums, etc., were $7,982.12, leaving a balance of accrued indebtedness chargeable to the property during that period of $3,357.76. This, with the $22,824.45, makes up a total of $26, 182.21 required to pay the Straus mortgage and the amounts paid by Mr. Adams on account of the property. This sum, I think, was close to the market value of the property before and after the foreclosure sale.
A comparison of the agreement with Mr. Adams as stated in the bill with the same agreement as stated in Mr. Seeley's examination in chief and his restatement on his cross-examination, discloses that Mr. Seeley has only a general recollection of a conversation with Mr. Adams, in which Mr. Adams promised to buy in the property, and put a mortgage upon It, for negotiating which he would charge no commission, and the mortgage should be large enough to pay all incumbrances and indebtedness due from Mr. Seeley to Mr. Adams. What probably occurred was a conversation in which Mr. Adams said he would buy in the property to protect his own mortgages, and that he thought a mortgage might be placed upon the property large enough to pay himself, and that all he wished out of the property was his own debt. Under the circumstances, that was a conversation likely to occur; but it is in the highest degree improbable that Mr. Adams bound himself to negotiate sucha mortgage for such an amount, and then to reconvey the equity of redemption to Mr. Seeley. After the foreclosure sale it is obvious that Mr. Adams would have been glad to dispose of the property to Mr. Seeley, or for his benefit, in any way to secure his own indebtedness. It is quite clear that Mr. Seeley himself was endeavoring to interest others in bringing about that result, and that at his instance two parties applied at the office of Mr. Adams to ascertain the amount necessary to clear the property. The certificate given by Mr. Adams on July 20, 1899, respecting the value of the property, was evidently intended to be used for that purpose. That purpose seems not to have been attainable. Now, assuming that the circumstances were such as in equity would permit Mr. Seeley to redeem this property upon paying to Mr. Adams the amount of his advances, it is quite clear that this right could not exist indefinitely. Three years and six months elapsed between the date of Adams' purchase and the filing of this bill. Mr. Seeley had been apprised of the intention of Mr. Adams to deal with this property as his own at the time when the rent for the large cottage was demanded. Mr. Seeley had been dispossessed of the store in June, 1901, and of the cottage in January, 1902. The delay in bringing this suit, coupled with the facts that the placing of the mortgage for an amount sufficient to clear off the debts was impossible; that the amount of the debts of Mr. Adams was near the market value of the property; that the foreclosure sale seems to have been inevitable because the rents were insufficient to keep down the interest upon the incumbrances and to pay taxes and insurance premiums; that Seeley could not buy, and Adams had to buy in the property—refutes the theory of fraudulent conduct on the part of Adams, and deprives the complainant of a right to relief. The person who now holds title to the property, not having been brought in as a party, of course would not be bound by any decree made against Mr. Adams.
I think the bill should be dismissed, but without costs.