RUNYON, C.
Bill for relief. On final hearing on pleadings and proofs.
J. S. Salmon, for complainant.
J. H. Neighbour, for defendants.
RUNYON, C. The complainant brings this suit to obtain relief from a fraudulent transaction by which he was induced to accept from the defendants Handvil and wife a conveyance of mortgaged promises in satisfaction of the mortgage, and to deliver up the mortgage to them. Between the time of conveyance and the time of executing the deeds in pursuance thereof the Handvils put upon part of the premises a mortgage to the defendant Amanda Brennon for $4,500, of which the complainant had no knowledge or information, and the existence thereof the Handvils concealed from him. Had he been aware that that mortgage had been given, he would have refused to carry out the agreement.
On the twenty-fourth of November, 1876, the complainant conveyed his farm, in the township of Chester, in Morris county, to Mrs. Handvil for the consideration of $7,000. She paid nothing, but gave him a mortgage for the purchase money upon the farm, and a house and lot owned by her in Boonton, on which were a dwelling-house and shop, and which were subject to a mortgage for $500. The mortgage so given to the complainant was payable in two years from the first of April, 1877, i. e., on April 1, 1879, with interest from April 1, 1877, at 7 per cent. per annum, payable semi-annually according to the bond of the Handvils. The Handvils entered into possession of the farm soon after the deed was given, and about the first of December following. They never paid either principal or interest, though often requested by the complainant from time to time to pay the interest due. In the latter part of February, or early part of March, 1879, he by letter requested payment of the interest, and threatened to begin foreclosure proceedings if it were not paid. On the eleventh of March, Handvil, in reply to the letter, called upon the complainant, and told him that there was no use in proceeding to foreclose; that he would convey the property to him, and thus spare him the expense. To this the complainant replied that he could find no fault with that, for he had had the records searched, and had found nothing upon the Boonton lot except the $500 mortgage, which was upon it when the complainant's mortgage was given, just as Handvil had told him, (referring to the fact that, when the complainant took his mortgage, Handvil said to him that he would take his oath that the $500 mortgage was all the incumbrance that there was upon the property,) and an old judgment of 20 years' standing. The complainant's lawyer had, at his request, searched the title, with a view to foreclosure proceedings, about the fifteenth of February, and had communicated the result of the search to him a few days afterwards.
About a week after the conversation just mentioned a time was fixedcomplainant says it was not worth over $1,000 or $1,200 above that mortgage, and it appears that the very next day after he got the deed for it he offered to rent it for $3 a month, or to sell it for $1,000, including the amount due on the $500 mortgage. The Handvils, after the exchange of the papers, continued to live upon the farm under an arrangement between the complainant and Handvil by which he was to work it "on shares." It was not until October, 1879, that the complainant was informed that in the latter part of March, 1879, and after the Handvils had agreed to convey the properties to him in satisfaction of his mortgage, they gave to their daughter, the defendant Amanda Brennon, a mortgage for $4,500, and interest, upon the Boonton property. As before stated, it was on the eleventh of March that Handvil offered to convey the two properties to the complainant to spare him the expense of a foreclosure, and the complainant accepted the proposition. About the twenty-fourth of that month Handvil and his wife executed a mortgage of the Boonton property to his daughter for $4,500, which mortgage was not recorded until the twenty-sixth of April following, after the deeds to the complainant had been drawn, and only six days before they were executed and delivered. Handvil swears that he informed the complainant of the existence of that mortgage before the deeds were executed, but the evidence is to the contrary. He says that he required that the word "mortgages" be struck out of the deed for the property (the word "mortgages" was not in the deed, but the word "mortgage" was) before he would execute it. But Howell swears that the reason he gave for it was that they (Howell and the complainant) knew that there was a mortgage upon the property. Howell, supposing that he referred to the $500 mortgage, struck out the word.
Handvil, who was sworn after Howell, says that what he said was (and he says it was all that was said on the subject at that time) that the complainant knew there were mortgages on the property. He adds that there was not anything said as to what the mortgages were. He also says that before the giving of the deeds he told the complainant about the $4,500. This is denied, and the circumstances, as well as the testimony, conclusively show the contrary. And here it may be remarked that the testimony of Handvil on the subject of that mortgage is utterly unworthy of belief. It abounds in the most palpable and apparently reckless contradictions, and in statements so incredible as to cast discredit upon all his testimony. It seems highly probable that his carefulness to have the word "mortgage" stricken out was due to an intention thus to lay the foundation of a claim that the complainant knew of the $4,500 mortgage. Nor is the claim of the Handvils, that the deed of the Boonton property was given merely as a mortgage to secure $300 due from them to the complainant upon two promissory notes given by them to him, established. It is quite evident that the complainant expected to realize but little from that property when he took it, but it was because of its then small value. From August, 1879, to April, 1880, the house was rented for 50 cents a week, and the shop was unoccupied until February, 1880. From May, 1879, to June, 1884,the rents for both house and shop did not exceed nine dollars a month, and for 1880 and 1881 they were only six dollars or seven dollars a month. In December, 1879, after he had discovered the existence of the $4,500 mortgage, the complainant wrote to Handvil, saying that if the latter would give him $1,000 he would give him a deed for the property, and give him the notes, and added: "Lawsuits cost money and I have no money to spend; but if you don't do this, I shall commence a suit against you." Notwithstanding the testimony of the Handvils to the contrary, the proof is that the complainant has had possession of the property from the time of giving the deeds. Mr. Salmon, the complainant's lawyer and agent, testifies that he received the keys before the twentieth of May, 1879, and that he has had charge of the property ever since. It seems quite improbable that Handvil, who was so cautious in regard to the bond and mortgage held by the complainant, and insisted upon their being delivered to him before he would deliver the deeds, and was so careful also to have the word "mortgage" stricken out of the deed for the Boonton property before execution, would have been willing to convey that property, which he swears he considered to be worth at that time $10,000, and for which he says he was offered $11,000 in 1876, to the complainant in fee merely as a mortgage to secure $300, without taking from him anything whatever to show that that was the true character of the conveyance.
It is clear from the evidence that there was a fraudulent concealment of the existence of the $4,500 mortgage from the complainant, and that, had he known of it, he would not have accepted Handvil's offer to receive a conveyance of the mortgaged premises in satisfaction of his bond and mortgage. If one conceals a fact material to the transaction, which is within his knowledge, and which it is his duty to disclose, he is guilty of actual fraud. 2 Pom. Eq. § 901; Keen v. James, 39 N. J. Eq. 527. I am by no means satisfied that the $4,500 mortgage was taken in good faith. The testimony leads to the contrary conclusion. There is great reason to believe that it was made and taken by collusion to defraud the complainant. The transaction, as the parties themselves state it, was a most unusual one, and conducted in a most unusual manner, and the fact of the relationship of the parties does not account for its peculiar features. There is much reason to doubt whether Mrs. Brennon had the money which she claims to have lent to her father upon the mortgage. Her mortgage should be postponed to that of the complainant. When she took it, it was the third mortgage upon the property. The complainant's was the second, and was duly recorded. It was not cancelled of record until May 20, 1879, nearly two months after her mortgage was given, and nearly a month after the latter was recorded. When she took her mortgage, which was about March 24, 1879, the complainant's mortgage had not been satisfied. At that time he bad indeed accepted the proposition of the Handvils to receive a conveyance of the mortgaged premises in satisfaction of the bond and mortgage, but the agreement was not executed until May 1st following. She says, and so does her father, that the whole of the $4,500 was advanced at once atthe date of the mortgage, or a day or two afterwards. She therefore in nowise relied upon the cancellation of the complainant's mortgage. Justice requires that the complainant be restored to the position which he has lost through the defendants' fraud, and there is nothing in her position to forbid.
The deeds from the Handvils to the complainant will be set aside, and the bond and mortgage of the complainant reinstated, and the cancellation of the record of the latter set aside. The complainant is entitled to costs.