Magie v. Reynolds

Full title: MAGIE v. REYNOLDS et al.

Court: COURT OF CHANCERY OF NEW JERSEY

Date published: Mar 13, 1893

51 N.J. Eq. 113 (Ch. Div. 1893)

51 N.J. Eq. 113

Opinion

03-13-1893

MAGIE v. REYNOLDS et al.

Edward S. Atwater, for complainant. William B. Guild, for defendant Bloss. Campbell & De Baun, for defendants Reynolds and wife. C. W. Berdan, for defendant Mrs. Day.

PITNEY, V. C.

(Syllabus by the Court.)

Bill by Abby M. Magie against Edward M. Reynolds and others to foreclose amortgage. Judgment that the mortgage be canceled and delivered to defendants Reynolds and wife, and plaintiff have judgment on amended pleadings for the amount of the mortgage debt against defendant Bloss.

Edward S. Atwater, for complainant.

William B. Guild, for defendant Bloss.

Campbell & De Baun, for defendants Reynolds and wife. C.

W. Berdan, for defendant Mrs. Day.

PITNEY, V. C. This is, in form, a bill to foreclose a mortgage. The mortgagors, Reynolds and wife, set up fraud in its procurement, and by cross bill ask that it be delivered up to be canceled. The ultimate question in the cause is, which of two innocent parties—the complainant on the one side, or Reynolds and his wife on the other—shall suffer by the fraudulent practices of a third party? The mortgage thought to be foreclosed was executed by the defendants Reynolds and wife to Emma A. Sumner, the wife of Perrin H. Sumner, on the 2d of January, 1889. It was assigned by Mrs. Sumner to the defendant Benjamin O. Bloss on the 18th of December, 1889, and again by Bloss to the complainant on the 15th of March, 1890. The mortgage covers a small farm and dwelling situate at May wood, near Hackensack, Bergen county, N. J. The particulars of the fraud set up in the answer and cross bill are as follows: That Reynolds was the owner of the farm above mentioned, upon which there was an undeveloped brown stone quarry, and, being desirous to have it developed, he applied to Sumner to assist him therein, and that Sumner undertook to do so, but that he required some security to be given to investors whom he might interest in it that it would turn out upon experiment that there was a sufficient quantity of marketable stone upon the premises, and for that purpose induced the defendants to execute the bond and mortgage in question; and they allege that in point of fact they received no consideration whatever for the mortgage, except as follows: That Sumner, upon their objecting to giving a mortgage under the circumstances and for the purpose just stated, proposed to give them a counter indemnity in the shape of a one-tenth interest in a farm containing 525 acres, situate at Manor, in Suffolk county, L. I., which Sumner then pretended to own, and stated to them that it was worth $50,000, and that, relying upon the representations, statements, and promises of Sumner, they took a deed from Sumner for a one-tenth interest in the said tract of land. That afterwards Sumner informed them that he had agreed to sell his interest in the farm to Bloss, and that, in order to enable him to make a conveyance, it was necessary that the defendants should return to him, Sumner, the deed which they had received from him, and which had not been recorded, and that for such surrender Sumner would give them a consideration in valuable gold mining stock, from which could at once be realized a sum sufficient to operate the quarry. Believing these representations. they surrendered the deed to Sumner, and thereupon received a quantity of gold mining stock; and by way of making them believe that the stock was valuable, Bloss loaned them $50 on a promissory note of Reynolds, and took as collateral one of the certificates of stock, representing 25 shares of the stock in a gold mine. That the said shares of stock turned out to be utterly valueless, and that Sumner promised to return the bond and mortgage and deliver it up to be canceled. The replication to this cross hill sets up that the mortgage was given for a full consideration, namely, the conveyance of the interest in the Long Island farm, and denies the allegations that the mortgage and conveyance were made by way of indemnity and counter indemnity.

The facts are that Reynolds was a retired officer in the marine service of the United States, having attained the rank of captain, and reached the age of about 65 years, and having been dropped or discharged from the service, and being very poor and without means of support, and having no property except the farm in question. He was a man of no business training or capacity whatever, of slender intellect, and entirely unfit to take care of himself in dealing with a shrewd man of the world. His wife was some years his junior, with the ordinary capacity of an American wife, and without any experience in business. They were very poor, and the captain was anxious to obtain employment and occupation, and also to derive some income from the supposed stone quarry on his farm. Some time prior to the 1st of January, 1889, one Willis was the owner of the farm in question on Long Island, which was called the "Horn Tavern Farm," subject to a mortgage of $8,000, held by the Mutual Life insurance Company of New York, and some judgments against Willis, and arrears of taxes, etc., and, being desirous to sell the farm, he applied to Sumner to do it, and agreed to give him one third of all he could get over and above the incumbrances, and that Sumner procured a Dr. Marquet to take a one-third interest in it at a price actually paid of over $2,000, and Sumner received from Willis a conveyance for the other two thirds to his son, Arthur E. Sumner, who subsequently, in December, 1888, conveyed it to Emma A. Sumner, so that Emma A. Sumner, on the last of December, 1888, had standing in her the title to two thirds of this Long Island farm. I am satisfied from the evidence of Dr. Marquet and Bloss and the circumstances that the farm was worth nothing above the incumbrances. Such being the situation, in the middle or towards the last of the year 1888 Reynolds was introduced to Mr. Sumner, who had an office in Broadway, New York, and solicited his aid in developing the stone quarry. Sumner immediately set about procuring a mortgage from the captain and his wife on their farm, and, according to their story, first tried to trade them some coal lands and other matters of that kind, and finally, as they both swear, he induced them to they him the mortgage in question, substantially under the circumstances and for the reasons set out in their answer and cross bill, viz. as an indemnity to secure persons taking an interest in the stone quarry, and that the conveyance of the tenth interest in the Long Island farm was given as a security to them against the mortgage. This evidence on their part is denied by Sumner, and, in point of fact, on the 31st of December, 1888, Capt. Reynolds and wife and Arthur E. Sumner entered into a contract in writing, which is made up partly of print and partly of manuscript, and is full of interlineations and erasures, so that it is quite difficult to decipher, and some of the interlineations are in a different ink from the other part of the writing. None of them are noted, so that it is impossible now to determine from the face of the paper what parts were actually written in it at the time it was signed. The purport of it is that Capt. Reynolds and wife, in consideration of one dollar, agreed to grant and convey unto Arthur E. Sumner a first mortgage and bond on the Bergen county farm, to be due in five years from the date, to bear interest at the rate of 6 per cent. per annum, semiannually; and Sumner agreed to grant and convey unto Reynolds and wife an undivided one-tenth interest in and to the Long Island farm by quitclaim deed, but, in case the land in the mean time should be deeded to a company, Reynolds was to have one eighth of the surplus stock of the company after the treasury stock had been deducted. It is stated in the contract that the entire tract of land was subject to a mortgage of $6,000, held by the Mutual Life Insurance Company of New York, and other liens, judgments, and taxes, and that the judgments are to be taken care of and paid by L. Marquet as per his agreement; that the deed or the stock in the company to be formed to develop the Long Island farm were to be delivered on or about the 25th of June, 1889, but the mortgage was to be delivered directly, the mortgage to be made to Sumner; or to any one he might designate; and there is an interlineation in a different ink to the effect that no warranty or representations have been made by P. H. Sumner or any one as to the value of said farm. Reynolds and wife admit their signature to this paper, but they have no recollection of having signed it, or of knowing the contents or effect of it; and it is manifest that at this time, and for a considerable period afterwards, they had perfect confidence in Sumner, and would have signed anything he asked them."

It will be observed that at the time this contract was entered into with Arthur E. Sumner the title to the premises was not in him, but in his mother. On the 20th of February, 1889, Mr. and Mrs. Reynolds signed another agreement, in which they agreed to accept one tenth of the surplus of the stock of a company to be formed after the stock to be put into the treasury of the company has been deducted in payment in full of the mortgage of $5,000above stated. The contract does not state what the company was to be formed for, but the allegation and inference is that it was to be formed to develop the Long Island farm, to turn it into a cranberry farm. On the 26th of March, 1889, Mr. and Mrs. Sumner executed a deed to Reynolds and wife, in consideration of one dollar and other considerations, for the one-tenth part of the Long Island farm, "subject to a mortgage given to the Mutual Life Insurance Company of New York to secure the payment of $6,000 and interest, and also subject to certain judgments now on record in said county of Suffolk." That deed was acknowledged on the same day, and delivered, but, at the request of Sumner, was not recorded until the 21st of August, 1889, on which day a suit was commenced in the supreme court of New York for Suffolk county by Willis and wife, the original owners of the Long Island farm, against the three Sumnerg, praying that the conveyance from Willis to Arthur E. Sumner and from him to Emma A. Sumner might be set aside on the ground that it was procured by fraud. This suit was undoubtedly the reason for the recording of this deed and others now to be mentioned. Shortly before that date—August, 1889— Sumner introduced Reynolds and wife to Bloss, and the result of that introduction was that on the 14th of August, 1889, Mr. and Mrs. Reynolds conveyed their one tenth interest to Bloss; and Sumner and his wife having, on the 29th of July, 1889, by deed of that date, recorded August 23, 1889, conveyed seventeen thirtieths of their interest to Bloss, Bloss now held two thirds of the title to the Manor farm. As a consideration from Bloss to the Reynoldses for the conveyance by the Reynoldses to Bloss of the one-tenth interest in the Long Island farm, Bloss transferred to the Reynoldses 275 shares, par value of $10 each, of the Bay State Gravel Mining Company of Butte County, Cal., and 200 shares of the Queen Bee Gold Mining Company of Dakota, the par value of which is not stated. These shares were said to be worth $2 a share at the time. Bloss also transferred to him one other certificate of 25 shares of some kind of mining stock, which Bloss took back as collateral security for $50 advanced to Capt. Reynolds, for which betook his note. The aggregate value of all the shares transferred, at the value placed upon them at the time, was only about $2,500. Sumner and wife and son answered the suit brought by Willis and wife against them, and set up that they had no further interest in it, because they had conveyed all their interest to Bloss. The complaint was amended by bringing in Bloss and Reynolds and wife. Bloss answered, denying the fraud, and claiming to be a bona fide purchaser for a valuable consideration without notice of the two thirds conveyed to him, but does not set out in his answer what that consideration was. Reynolds and wife did not answer. The cause came on for trial before Judge Bartlett of the supreme court in the summer of 1890, both Bloss and Reynolds being present at the trial and being sworn as witnesses, and the court found as a matter of fact that the conveyance from Willis and wife to Arthur E. Sumner was absolute as to one third, but as to the other one third it was in trust, and that as a matter of fact the defendantsReynolds and wife received their title to one tenth merely as a collateral security, and that at the suggestion of Sumner they transferred the title to Bloss, and that Bloss was not a purchaser for value, and that he held the title for and in the interest of Sumner. In the mean time Sumner and wife, on the 18th of December, 1889, assigned the Reynolds mortgage in question to Bloss by deed which stated a consideration of $5,000. That assignment was recorded on the 1st of February, 1890, and Bloss, on the 15th of March, 1890, assigned it to Abby M. Magie, the complainant herein, and that assignment was recorded on the 15th of April, 1890. No money was paid directly by Bloss to Sumner for the assignment from Mrs. Sumner to Bloss, and the evidence of Sumner and Bloss on the subject of the consideration is unsatisfactory. As to the assignment from Bloss to the complainant, however, the evidence shows that Bloss nominally, but Sumner really, who was the actual owner at that time, received a valuable consideration from Mrs. Magie for it. That consideration arose in this wise: Mrs. Magie is an aged lady, residing in Kansas City, Mo., and has no personal knowledge of any of these transactions. She is represented here by her daughter, a Mrs. Terhune, a very worthy lady, residing in Brooklyn, who had the misfortune to come into contact with this man Sumner. Mrs. Magie, the complainant, was the owner of a house and lot at Roselle, in Linden township, Union county, N, J., and on the 20th of November, 1889, conveyed that property to Benjamin G. Bloss by deed which, though dated in 1884, was not delivered or recorded until the 20th of November, 1889. It was in fact executed in 1884, with the name of the grantee left blank, and in November, 1889, Bloss' name was inserted in that blank. Sumner, who conducted the transaction, knew of this, and was willing to accept the deed under those circumstances. Bloss, on the 11th of November, and shortly before the deed from Mrs. Magie to him was lodged for record, executed a mortgage to Mrs. Magie upon the property so conveyed to him, to secure the payment of $4,250, part of the consideration money, in five years from date. Mrs. Terhune had become the owner, through the agency of Sumner, of a tract of laud adjoining the Horn Tavern farm on Long Island upon which Mrs. Sumner held a mortgage of $1,000, and Sumner proposed to Mrs. Terhune that if she would cause her mother, Mrs. Magie, to assign to his wife the mortgage which she held against Bloss for $4,250 on the Roselle property he would procure Bloss to assign to her an interest in the Reynolds mortgage here in question, and would discharge the mortgage which Mrs. Sumner held upon Mrs. Terhune's property in Suffolk county; and that arrangement was made, Mrs. Magie, on the 11th of March, 1890, assigned to Mrs. Sumner the mortgage which she held against Bloss on the Roselle property, and Mrs. Sumner assigned to Mrs. Magie the mortgage on the latter's property on Long Island, and Bloss thereupon assigned to Mrs. Magie the mortgage here in question to the extent of the sum of $3,042.74, and Bloss guarantied the payment of it to that extent to Mrs. Magie. Mrs. Sumner immediately released to Bloss the mortgage so assigned by her by Mrs. Magie, and took anew mortgage in its place, and subsequently procured the property at Roselle to be sold for taxes, and it was bought in by Mrs. Sumner. So that Mrs. Sumner at present holds the tax title to the Roselle property, and a mortgage upon it, and Mrs. Magie holds the title to the Reynolds mortgage to the extent of a little over $3,000. I should have observed that at the very time, to wit, December 31, 1888, when these transactions occurred between Reynolds and wife and Sumner, the mortgage held by the Mutual Life Insurance Company of New York on the Long Island farm had been foreclosed, proceeded to decree, and the property was actually advertised for sale by the sheriff; and afterwards (just when does not appear) the property was sold and bought by the company at a price less than enough to pay the mortgage; but the Mutual Life Company gave the parties who appeared to be interested the privilege of redeeming it by paying $5,000, and those parties at the hearing were admitted to be Mr. Perrin H. Sumner as to one half, and an outside party, not connected with these transactions,—one Whitlock,—as to the other part; thus confirming the finding of Judge Bartlett that Bloss never really had any interest whatever in that farm.

It abundantly appears that the shares of mining stock which Capt. Reynolds received were of no value whatever, and the evidence of Bloss and Sumner failed to satisfy me that any consideration was paid by Bloss to Sumner on the assignment of the mortgage. But whether any consideration passed between Bloss and Sumner is immaterial, since both swear that at the date of the transfer to Mrs. Magie, Bloss' interest in it had ceased, and he held it for the benefit of Sumner or his wife. I am also satisfied that neither Capt. Reynolds nor his wife understood the nature or character of the contract of December 31, 1888, which they signed, and also that the subsequent transfer of the share in the Manor farm to Bloss was done at the instance and request of Sunnier, and without any idea on their part that by so doing they were giving any additional strength to, or varying the character of, the mortgage. It is further in proof that no demand was ever made by Sumner or his wife upon Capt. Reynolds for interest; that a formal demand was made by Bloss, but never followed up, and upon the assignment by Bloss to Mrs. Magie the bond and mortgage was retained by Bloss, and that he paid interest to Mrs. Magie on the portion of it which he did assign to her and finally, falling to pay, she took measures to get possession of the bond and mortgage itself, which she finally did, and brought this suit on the 17th of November, 1891, nearly three years after the mortgage was given, and more than two years after the first default in interest. Mrs. Magie made no inquiries of Capt. Reynolds or wife or any one in their interest as to the validity of this mortgage, and took it blindly upon the assurance of Sumner. In point of fact Mrs. Terhune applied to Sumner to sell her mother's house and lot at Roselle. Sumner found a purchaser in Bloss, though I doubt if Bloss was anything more than a figurehead for Sumner. He also induced her to purchase the property in Suffolk county, and his hand is visible throughout all the various transactions heretofore detailed. Without going through the details of the various inter views between Capt. Reynolds and wile and Sumner and Bloss, I am satisfied that the mortgage was procured by fraud, without any consideration, unless the shares of mining stock may be so held, and that Bloss' connection with the affair was entirely in the interest of Sumner, he lending himself to Sumuer to aid him in defrauding Reynolds and wire, and that he never had any interest in the bond and mortgage; so that, if either Mrs. Sumner or Bloss were complainants in the cause, the result would not be open to a moment's doubt.

The well-settled rule in this state, as well as in other equitable jurisdictions, is that an assignee of a bond and mortgage takes it subject to all the equitable defenses which the original obligors and mortgagors have thereto. This is so at law as well as inequity. It was so held at law in an action on a bond in Barrow v. Bispham, 11 N. J. Law, 110, after an elaborate consideration of the authorities. And the same doctrine was held in equity by Chancellor Vroom in Shannon v. Marselis, 1 N. J. Eq. 413. At page 424 the chancellor examines the authorities In England and New York, and quotes with approbation the language of Chancellor Kent in which he states that it is the duty of the assignee to make inquiries of the obligor or mortgagor or person owning the equity of redemption before taking an assignment of the bond and mortgage. And see the remarks of the lord chancellor in Matthews v. Wallwyne, 4 Ves. 118 at page 127. This ruling was followed in Jaques v. Esler, 4 N. J. Eq. 461, by Chancellor Haines, and by Chancellor Green in Woodruff v. Depue, 14 N. J. Eq. 168, and by Chancellor Zabriskie in Conover v. Van Mater, 18 N. J. Eq. 481, and again by the same judge in Coursen v. Canfield, 21 N. J. Eq. 92, and has never been questioned or doubted, and finally has the approval of the court of errors and appeals in At water v. Underbill, 22 N. J. Eq. 599, at page 606. The principle underlying this rule is that the mortgage is a mere incident of the debt which it is intended to secure, and a defense to the debt is a defense to the mortgage. If the mortgage is given to secure a negotiable promissory note, and the note is negotiated for value in the ordinary way before maturity, the holder will hold it and the mortgage free from all defenses. 2 Jones, Mortg. § 1487, and cases cited. But if the mortgage be given to secure a nonnegotiable instrument, the assignee takes it subject to all defenses to the bond or other instrument manifesting the indebtedness. In this aspect the assignment of a mortgage, though it assume (as it usually does) the form of a conveyance of land, differs from an ordinary conveyance in which the grantor for value takes the title free from all prior conveyances and equities of which he has no actual or constructive notice. Carpenter v. Longan, 16 Wall. 271, at page 275; Matthews v. Wallwyne, 4 Ves. 118, at page 129; Coote, Mortg. p. 301 et seq. A mortgagor and obligor may, however, so conduct himself as to mislead a proposed assignee, and estop himself from setting up his defense; and 1 have looked with care into this case to see if I could find anything in the conduct of Mr. and Mrs. Reynolds which would estop them as against Mrs. Magie. It is true that Bloss swears that shortly before he took the assignment from Mrs. Sumner he talked with Mr. and Mrs. Reynolds about this mortgage, and they declared it was a good mortgage, and seemed anxious that he should take it, and advance the money upon it, and it is evident from his evidence, if truthful, that they at that time expected that, if Bloss did advance the money upon it, they would get it; and if he had done so, upon the hypothesis that his evidence is true, the mortgage would have been a valid security in his hands. But the fact is that I am not satisfied that Bloss ever advanced anything at all upon the mortgage to Sumner or his wife, and the undoubted fact is that if he did so he had been repaid all that he advanced prior to the date of the transfer to Mrs. Magie, because, as before remarked, Sumner or his wife were the undoubted owners of the mortgage at that time, and received from Mrs. Magie the consideration for its assignment. Bloss assigned it at their request, and for their benefit, and at that time claimed no interest in it. No interest was ever paid on the mortgage, nor is there any indorsement of interest upon it, so that the complainant was not misled by anything of that sort; and, as before observed, she made no inquiries with regard to it from either Reynolds or his wife or anybody representing them.

Two matters have been put forward as furnishing some ground for an estoppel. One is a contract entered into between a man by the name of Randall and Mr. and Mrs. Reynolds on the 10th of October, 1889, in which Reynolds and wife agreed to exchange with Randall 10,000 shares of stock in the Maywoos Brown Stone Quarrying Company (which had been organised for the purpose of developing the stone quarry) for a lot of land in Norwalk, Conn., owned by Randall, and in that contract there is a statement that the property of the quarrying company consisted of about 16 acres of land underlaid with brown stone, "subject to a mortgage of $5,000, with interest at five per cent. per annum." This clause in this contract is relied upon as a recognition by Reynolds and wife of this mortgage, but it does not appear that Mrs. Magie ever saw it, or in any wise relied upon it. Then, again, there is produced a deed dated the 20th of February, 1889, made very shortly after the execution of this mortgage, by Reynolds and wife to the stone quarry company of a part of the mortgaged premises, said to contain about 17 acres of land, and which was duly recorded, and in that deed is this clause: "Subject to one mortgage now on the said premises, given to secure the paymentof $5,000 and interest thereon." This reference to a mortgage, like that in the contract to Randall, does not identify it, and it does not appear in this case either that Mrs. Magie or her agent ever saw or relied upon that deed in any way. The only fact which has at any time struck me as affording the least ground of estoppel is the forbearance of Reynolds and wife to take any steps to have this mortgage canceled and removed. It will be observed that it was made and executed on the 2d of January, 1889; that it was assigned by Sumner to Bloss on the 18th of December, 1889, and that this assignment was recorded on the 1st of February, 1890, and that it was assigned by Bloss to Mrs. Magie on the 15th of March, 1890. When asked upon the stand why they had allowed the matter to remain so long, Reynolds and wife said that they were at all times poor; that at first they had confidence in Sumner; then they began to lose confidence, and asked him to return the mortgage, and that he promised from time to time to do so, and that they relied upon his promises, and then that they consulted counsel in New York, who promised to do something for them, but was taken sick and died, and that in the mean time they were in hopes of managing to get the mortgage out of his hands by friendly negotiations, and that finally they put the matter into the hands of Mr. Campbell, their counsel in Hackensack, who, for some undisclosed reason, did nothing until the bill to foreclose was filed in this cause. But upon full consideration I have come to the conclusion that it was not the duty of Mr. and Mrs. Reynolds to commence suit to have this mortgage canceled, and that their not doing so forms no ground of estoppel. They had a right to rely upon the well-settled rule of law that the purchaser of a chose in action of this character takes it subject to all equities, and that he has the power to protect himself by making inquiries at the proper sources; and therefore they are entitled to a decree that the complainant's bill be dismissed as to them, and that they are entitled to have the bond and mortgage delivered up to be canceled.

This result renders it unnecessary to determine the question arising as against Mrs. Day, who, in the summer of 1889, purchased a small piece of this farm from Mr. and Mrs. Reynolds, and entered into immediate possession of it. Reynolds procured from Sumner a release of this lot, which he handed to Mrs. Day, with her deed. It was executed before the assignment from Sumner and wife to Bloss. Mrs. Day, however, failed to get it recorded until this bill was filed. I am referred on this part of the case to the act of February 25, 1880, (P. L. p 53;) Supp. Revision, p. 134, §§ 14-16. The third section of that act provides "that when any such release, or deed intended to operate as a release, made and executed after this act shall take effect, is not recorded, or when in such release or deed the intention to operate as a release shall not be plainly manifest, us in this act provided, any payment made in good faith and without actual notice of such release or deed, to the holder of any mortgage or judgment, from the lien and effect of which any lauds may be thereby released, and any assignment of such mortgage or judgment, or of any interest therein, to any person not having actual notice of such release or deed, shall be as valid and effectual as if said release or deed had not been made; and any lands released from the lien and effect of any mortgage or judgment by any such release or deed not recorded shall be bound by any proceedings and sale under and by virtue of such mortgage or judgment as if the said lands had not been released from the lien and effect thereof." If I had come to a different conclusion as to the validity of the mortgage in complainant's hands, the act would have given rise to a serious question. But the statute clearly deals with a valid mortgage upon which something is due, and cannot be used to give life to a mortgage upon which nothing is due by investing the assignee with the protection of the position of a bona tide purchaser of land for value.

It was further urged that the brown stone quarrying company is not in a situation to take advantage of the defense set up by Reynolds and wife. As a part of the plan for developing the brown stone quarry, a company which had been previously organized by Capt. Reynolds for that purpose was given life by the election of officers, etc., of which Mr. Reynolds was one and Sumner was another and a friend of Sumner was a third, and a conveyance made, as above stated, to this corporation of a portion of the mortgaged premises. That deed was dated the 20th of February, 1889, and is without any consideration mentioned in it whatever, and contained the clause hereinbefore recited. It does not identify the mortgage, and it does not declare that the amount due on the mortgage is taken as part of the consideration money, and the proof fails to show any arrangement to that effect. At that time Reynolds owned the whole stock, except a few shares transferred to Sumner for aiding in its organization. The conveyance was made without any consideration in fact, was so understood at the time, and there could be of course, no understanding at the time that the amount of $5,000, mentioned in the mortgage, was taken as a part of the consideration money, or that that amount was to be paid by the quarry company. As the conveyance was for only a portion of the land covered by the mortgage, and the presumption, in the absence of any facts or expression showing a contrary intent, would be that the understanding between the parties was that the mortgaged premises were to bear the burden of the mortgage in the inverse order of their conveyance, and that the portion of the premises not included in the conveyance to the quarry company should be sold first to pay the mortgage. Gray v. Hattersley, (N. J. Ch.) 24 Atl. Rep. 721. And I think that the reference to the mortgage in the deed does not have the effect of casting the burden of it upon the premises conveyed, but may be accounted for by the fact that the conveyance contains full covenants of seisin and warranty. Nodoubt the object of its insertion in the deed, which is in the handwriting of Sumner, was to fortify his position as holder of the mortgage. But the question here does not arise between the grantor and grantee of a part of the mortgaged premises as to which part shall bear the burden of the mortgage,—a question in which the mortgagee or his assignee is usually not interested,—bnt it arises between the grantee of a part of the mortgaged premises and the holder of the mortgage, and is essentially a different question from the other. No doubt, if a grantee of a portion of premises subject to a mortgage assumes the payment of a certain sum,—the whole or a part of the sum due on the mortgage,—such assumption being in payment, in whole or in part, as the case may be, of the purchase price which he agrees to pay his grantor, such purchaser is ordinarily estopped from setting up any defense against the mortgage so assumed, and the reason is that he has the money in his hands to pay it. I say "ordinarily," because it seems to me that this general rule must be subject to a notable exception. The assumption is a matter of convention between the grantor and grantee, and the right to enforce it rests primarily in the former, and where it has been enforced in favor of the holder of the mortgage it has been done upon the principle that the holder of the mortgage is subrogated to the rights of the grantor in that behalf. In the case in hand, if the complainant's mortgage received additional validity by reason of the conveyance by the mortgagors, Reynolds and wife, to the quarry company, such addition comes to it through subrogation to the right of the mortgagors under their contract with the quarry company. In order to derive a benefit from that transaction, the holder of the mortgage cannot thrust upon the mortgagors and grantors the benefit of a right which they do not and never did claim. The mode in which the mortgagor and grantor in such cases is benefited is by having the whole or a part of the purchase money devoted to the payment of his debt, and the relief of his other property from the lien of the mortgage; and if, before any payment is made by the grantor to the holder of the mortgage, the grantor and mortgagor himself is forced to pay it, or does it voluntarily, as he may well do, a right would at once arise to him to call on the grantee to pay to him the amount instead of to the holder of the mortgage. In so doing he would be demanding only what was originally his own. It seems to me to follow that if, before any payment by the grantee to the holder of the mortgage, the grantor discovers that neither he nor his land is liable to pay anything whatever to the holder of the mortgage, he may rescind his contract with the grantee, and countermand, so to speak, his direction to him to make payment to the holder of the mortgage, and release him from his obligation in that behalf. This view is not, as I think, in conflict with the decisions upon this topic. Horton v. Davis 26 N. Y. 495; Freeman v. Auld, 44 N. Y. 50; Ritter v. Phillips, 53 N. Y. 533; Crowell v. Hospital. 27 N. J. Eq. 650; Brolasky v. Miller, 9 N. J. Eq. 807; Van Winkle v. Earl, 26 N. J. Eq. 242.

The quarry company did not answer the complainant's bill, but no decree has been entered against it. Upon the whole case I am of the opinion that the mortgage is not a valid lieu upon any of the property, and that it must be delivered up to be canceled.

The assignment from Bloss to the complainant contains a guaranty by Bloss that the amount of $3,042.74 is due and owing upon the mortgage, in these words: "I do hereby covenant and agree to and with the party of the second part that there is now due," etc., "and I do for myself, my heirs, executors, and administrators, to and with the said party of the second part, her heirs, executors, administrators, and assigns, guaranty the payment of the said bond and mortgage." That guaranty is set out in the bill. And, in addition to the ordinary prayer found in a foreclosure bill, there is a prayer for further and other relief. The prayer for foreclosure is in these words. "And that the said defendants, or some one of them, may be decreed to pay to your oratrix the said principal sums so due to her on the said bond or obligation and deed of mortgage hereinbefore mentioned and set forth, and all the interest money now due and to grow due thereon, together with all your oratrix' costs and charges in this behalf sustained, by a short day, to be appointed and in default," etc. It was contended by the counsel for complainant that this prayer was sufficient to entitle the complainant to a decree against Bloss, but, if the court should be of opinion that it was not sufficient he moved that he might be permitted to amend, and such a motion was made in the presence and with the consent of the counsel of Bloss. I think that it will be in accordance with good pleading that there should be an amendment containing a special prayer for payment by Bloss, and, after such prayer has been inserted, the complainant may have a decree for payment by Bloss, and a reference to a master to ascertain the amount due if the parties cannot agree. The defendants Reynolds and wife are entitled to costs against the complainant. There will be no costs in favor of Day and wife, because they failed to put their release on record. Complainant is entitled to costs against Bloss, to include the costs of Reynolds and wife.