REED, V. C. There were two mortgages upon the property of Dillon & Donnelly. The first was held by the complainants, and the second by Mary Ann Connor. On May 28, 1900, a bill was filed to foreclose the first of these mortgages; and on August 1st a final decree was made directing a sale of the premises, and that out of the proceeds there should be paid to the complainants $1,627.23, and then to Mary Ann Connor, the holder of the second mortgage, $1,381.66. On June 30, 1903, the Bergner & Engle Brewing Company filed a petition setting up the filing of the bill by the complainants, and final decree entered in the suit on August 1, 1900, as already set out. The petition set up that, after the making of the said decree, Dillon & Donnelly solicited the brewing company to advance them sufficient money to stay the sale of the said property under said decree; that thereafter it was agreed between the brewing company, through its agent, William H. Riegel, and Dillon & Donnelly, that the company would advance $1,381.66 (the true sum being $1,400) to Dillon & Donnelly; that said sum would be sufficient to satisfy the amount of accrued interest and costs on said decree, and would satisfy the said Mary Ann Connor the amount due to her, and would procure from her an assignment of her mortgage on said premises, and that, in consideration of the advancement of the said sum, Dillon & Donnelly would give the petitioners a lease on said premises for four years and eight months from the 1st day of October, 1900, the rent to be paid in advance; that, in accordance with said agreement, entered into with the knowledge of the complainants in the foreclosure suit, the petitioners did advance the said sum to Dillon & Donnelly, who made a lease to Riegel, the agent of the brewing company, for four years and eight months, and also procured an assignment of the Connor mortgage to the company, as a guaranty that the brewing company would not be disturbed in its possession of the leased premises by reason of anything in complainants' mortgage. The petition then set out that on May 14, 1903, the complainants made an affidavit of the amount due upon the decree, and that execution was issued, under which the property was advertised for sale; that the petitioners have tendered the full amount of the decree to the complainants, requesting them to assign the decree, which the complainants refused to do. The petition prayed that the petitioner might be made a party to the foreclosure suit, and be permitted to file an answer or cross-bill. The rule upon all the parties in the foreclosure suit, including Dillon & Donnelly, was allowed; and upon its return an order was made admitting the petitioner as a party, and permitting it to file an answer or cross-bill. In its cross-bill the brewing company set out the same facts as appeared in its petition, and asked to be permitted to redeem the mortgage of the complainants upon paying

the amount due upon the decree, with accrued interest and costs, and, in a supplemental bill and affidavits, asked that the sheriff be enjoined from selling the property under the said decree. An interlocutory injunction was directed. The brewing company deposited in this court the amount of the decree, and the money was taken out by the complainants on July 28, 1903. Dillon & Donnelly filed an answer to the cross-bill. In the answer they admitted that the sum of $1,400 was advanced by the brewing company for the purposes set out in the cross-bill, and that a lease was given, and that the Connor mortgage was assigned. But it denies that there was any understanding that the foreclosure proceedings should be indefinitely postponed. The answer asserts that a payment of the $1,400 was made as a loan, with the security of the said lease, and that it was agreed that in case Dillon & Donnelly should pay the said loan, without interest, then the brewing company should deliver up all obligations held by it for the security of the loan. It asserts, also, that the Connor mortgage was an additional security for the said loan. It sets up a tender to the brewing company of the amount due upon the said loan, and the refusal of the company to deliver up the lease and mortgage. It also sets up that they are ready and willing to pay the amount of complainants' decree, as well as the amount due to the brewing company. Upon this cross-bill and answer the case was set down for final hearing. Upon the hearing it appeared that the brewing company advanced the $1,400, out of which $242.49 was paid upon the Connor mortgage, and $219.79 was paid as the costs, with accrued interest, upon the complainants' decree, upon payment of which complainants consented to stay the sale of the premises. And it also appeared that the lease for four years and eight months-the term beginning October 1, 1900, at the yearly rent of $300, to be paid in equal monthly payments, of $25 eachwas made. Attached to this lease was a receipt given by Dillon & Donnelly to Mr. Riegel, the agent of the brewing company, for the sum of $1,400, expressed to be in full for rent of said premises, therein described, for the term of four years and eight months. This receipt is dated, "Trenton October 1st 1900." On October 7, 1900, the brewing company took an assignment of the Connor mortgage.

It is perceived that the effort by Dillon & Donnelly is practically to redeem the lease and the decree from the control of the brewing company. The pleadings are not exact ly conforinable to practice, as the effort should have been made by cross-bill, and not by answer. But the object of the parties is clear, and the pleadings can be amended, if it is found necessary, to reach the result aimed at, namely, to determine the character of the lease. It is manifest that Dillon & Donnelly, as mortgagors, have the right to pay

off the mortgage decree against them whenever they choose to do so. This, however, does not seem to be their purpose, so far as that purpose is disclosed in their answer, unless they can at the same time redeem the lease. I will therefore consider their right to redeem. It is perceived that the lease was given for a term which, at the rental named, viz., $25 a month, would amount to exactly the amount of money advanced. As already observed, the brewing company insists that the $1,400 was understood to be advanced as payment of rent in full for the term. It insists that, while the money was advanced for the benefit of Dillon & Donnelly, it was not advanced as a loan, but was payment of a consideration for the term, just as the company. might have bought any other property of Dillon & Donnelly, and paid them the cash, for the purpose of aiding them financially. As already observed, the assignment of the Connor mortgage to the brewing company is said by it to have been as security that the company would have the enjoyment of the full term of the lease, and, as said by Dillon & Donnelly, that it was as security, in addition to the lease, for the repayment of the same loan. There is nothing in the case or upon the face of the papers to show that the lease is a mortgage, unless a statement made up on January 5, 1903, by some one in the office of the brewing company, can be so regarded. This statement was made up, at the request of the solicitor of the complainants, for the purpose of ascertaining how much was due upon the Connor mortgage. This statement, after fixing the amount due upon the mortgage on August 7, 1900, allowed a cash credit each month from July 6, 1901, to January 5, 1903, of $25, amounting to $475. This credit was obviously for rent under this lease. But it is clear that the person who made up this statement did not understand the character of the transaction by which the mortgage had come into the possession of the brewing company. According to the testimony of neither party were the rents to be applied on the mortgage.

By the insistence of Dillon & Donnelly, the assignment was made to secure the payment of the $1,400 loan. Now, of the $1,400, $1,200 was paid when the lease was made, and $200 was paid by Connor, the sublessee from the brewing company. He paid the rent for eight months to Dillon & Donnelly, or for their benefit, in paying for repairs upon the premises. This eight months began October 1, 1900, and ended June 1, 1901. So that, in view of the situation taken by Dillon & Donnelly, only $1,200 was due to the brewing company on June 1st; and by the application of the rents from June 1, 1901, to January 5, 1903, 19 months, amounting to $475, there was left of $1,200 on the last date $725 due. The only inference that can be drawn from the statement is that the company understood that it owned

the Connor mortgage absolutely, and that the lease was to be used as collateral security for the payment of that mortgage. This inference, as already observed, is opposed to the position taken by both parties, and the statement based upon it was made by some one who was ignorant of the situation. In my judgment, the lease is what it purports to be a grant of a term for years, with a fixed rental paid in advance. The length of the term at the rent fixed seems to be a fair rent. The same sum was paid by the sublessee, and makes up exactly the sum advanced. No interest upon the $1,200 or the $1,400 was ever paid or demanded, and it is quite clear that no payment of interest was ever in the minds of the parties. Now, one of the tests whether what appears to be an absolute transfer or conveyance was in fact a mortgage is whether a debt remains due from the grantor to the grantee. If interest was paid, or was to be paid, the presumption would be that there was a debt upon which interest could accrue. It is inconceivable that an interest-bearing debt was understood to exist after the execution of this lease. Another test is whether the value of the thing granted is greatly in excess of the sum advanced or paid. In this case it is of the exact value of the sum paid. Again, if the lease was a mortgage, when was the debt due for which it was given? It is quite clear that the brewing company could not demand the payment of the $1,400, or any part thereof, after the lease was made, as no sum remained payable either upon demand or at any particular period. Now, the right to redeem is the inseparable incident of every mortgage, but the right to redeem cannot be asserted until the mortgage debt can be demanded by the mortgagee. Jones on Mortgages, pars. 1038-1052.

I am, for these reasons, constrained to the conclusion that Dillon & Donnelly are not in a position to redeem the lease and the Ann Connor mortgage. The right of the brewing company to redeem the mortgage from the complainants is clear. As already remarked, Dillon & Donnelly can pay off the decree now held by the brewing company, but they cannot hold it alive, as a menace to the leasehold estate held by the brewing company in the mortgaged premises.

(66 N. J. E. 209) ANDERSON v. ANDERSON FOOD CO. (Court of Chancery of New Jersey. March 14, 1904.)

MORTGAGE FRAUD — MUTUAL MISTAKE-CANCELLATION-REFORMATION-CONSTRUCTION.

1. Where a clause in a mortgage, making it a lien on the stock of the mortgagor, was introduced, after discussion of the attorneys for the parties, by the attorney for the mortgagor, who retained it in his possession for some time before it was executed, and the contents were made known to the mortgagor's representatives who executed the mortgage, there was no fraud

on the part of the mortgagee in having the clause in question inserted.

2. Cancellation of a purchase-money mortgage will not be decreed unless the mortgagor offers to restore the status of the parties which existed before execution of the mortgage by a redelivery of the property purchased.

3. Evidence held not to show clearly that the "stock, manufactured or unmanufactured, and in process of manufacture," of a food company, was included in a mortgage by mutual mistake of the parties, so as to authorize reformation by striking out the clause.

4. Where a food company produces such a quantity of canned goods that the major part of them must be disposed of outside the state, a deposit of about one-tenth of its goods in warehouses outside the state, and the use of the warehouse receipts as collateral to its commercial paper, is a part of the conduct of its ordinary business, within a provision in a mortgage of the goods that the company may "conduct its ordinary business, and in so doing dispose of any of the foregoing personal property," so that the mortgagee cannot have such removal of the goods from the state enjoined.

Bill by Abraham Anderson against the Anderson Food Company. Heard on bill, answer, and proofs. Original bill and crossbill dismissed.

The original bill of complaint in this cause was filed by Mr. Anderson, who is the holder of a real estate and chattel mortgage against the property of the defendant company, to restrain that company from removing any of the stock, fixtures, or personal property referred to in that mortgage except by selling the same in the conduct of its ordinary business, and also for a mandatory injunction requiring the defendant to return to its factory in the city of Camden 3,500 cases of canned tomato soup, alleged to have been wrongfully removed therefrom. The whole equity of the complainant's bill on which he claims a right to restrain the complainant mortgagor from disposing of the personal property is based upon a single clause in the mortgage. The instrument in question was made on the 20th day of September, 1901, between the Anderson Food Company (the defendant) and the Anderson Preserving Company. It is a mortgage to secure the payment of $100,000, with interest thereon, at the expiration of 10 years from the date thereof, and purports to be a lien upon certain real estate and personal property therein described; one of the items named being the "stock manufactured and unmanufactured or in process of manufacture," etc. It contains the following clause: "It, however, being particularly understood and agreed that the party of the first part may conduct its ordinary business, and in so doing dispose of any of the foregoing personal property." The mortgage has been assigned by the mortgagee to the complainant in this suit. The bill alleges that the defendant mortgagor has removed large quantities of tomato soup put up in small tin cans, and has caused the same to be stored outside of the state of New Jersey; and the complainant charges that this stock was

2. See Chattel Mortgages, vol. 9, Cent. Dig. § 147.

not removed in the conduct of its ordinary business, but in violation of the chattel mortgage, and for the purpose of repledging the same in order to raise money thereon, and that the defendant claims the right to remove and to repledge all of the said stock of said defendant company. The bill was supported by affidavits, and an order to show cause was allowed why an injunction restraining the defendant company in accordance with the prayer of the bill should not be awarded the complainant. On the coming in of the rule to show cause the defendant filed its answer, admitting the execution of the mortgage in question, and its assignment to the complainant, but alleging that it was signed and delivered by mistake and for want of knowledge of its real contents, contending that by the terms of the antecedent agreements under which the mortgage was made it should have been drawn as a security only upon the "plant, appurtenances, and equipment" of the defendant company, and that, unknown to the defendant, there was inserted in the mortgage the clause making it a lien upon its "stock manufactured and unmanufactured and in process of manufacture"; and the defendant avers that immediately on its discovery of the inclusion of its stock in the mortgage the defendant protested to the complainant that an unfair advantage had been taken, and demanded the reformation of the instrument. The answer admits the removal of the stock as mentioned in the bill, but insists that it was done without any fraudulent intent or purpose, and in accordance with the usual custom of the trade in the ordinary course of business, for the purpose of raising loans; though it insists that no loan has as yet been made upon said goods, and that it has, under the terms of said mortgage a lawful right to consign its said goods and obtain loans thereon; and that this course has been and is the daily practice of the defendant company, and its usual manner of doing business. In addition to its answer, the defendant company filed a crossbill, alleging that the mortgage in question was made pursuant to certain preliminary agreements which did not provide for the mortgaging of its stock of goods, etc., in the manner expressed in the chattel mortgage, and that it was never suggested by the complainant or his attorney, or by any of the parties to the agreement, that the security should cover the stock, but, on the contrary, it was understood and intended that the proposed mortgage should be a lien on the "plant, appurtenances, and equipment" only; that, although it was executed at the office of the complainant's solicitor, in the presence of the president and secretary of the defendant company, in fact neither of those officers read over the mortgage, nor was it read over to them before executing, nor did the officer who took the deposition thereof make any declaration as to the contents of the mortgage; that the officers of the defendant com

pany, supposing it to be a mortgage only on the "plant, appurtenances, and equipment" of the defendant company, executed it in absolute ignorance of its real terms; and the defendant charges that the execution of the mortgage as a lien upon the stock of the defendant company was either a mistake or a grevious wrong and fraud upon the defendant company. The defendant avers that about three weeks after the mortgage was recorded it casually discovered that it contained the clause making it a lien upon the defendant's stock of goods, etc.; that the defendant's secretary then protested against the same to the complainant and to his attorney; that the secretary and Mr. Beldon, attorney for the defendant mortgagor, examined the record of the chattel mortgage, and found that it did include the stock, etc., and that this was the first knowledge had thereof. The defendant claims that in person and by letter it was ever since protested against the inclusion in the mortgage of its stock of goods, and demanded a specific release of those goods, from the operation of the mortgage. The defendant company, under the allegation of its cross-bill prays that it may be decreed that the mortgage as executed is not the act and deed of the defendant company; that the complainant may be compelled to deliver it up for cancellation; or that a decree may be made reforming it by striking out the words "stock manufactured and unmanufactured and in the process of manufacture," or any other words of like import, wherever they may occur in the mortgage, and that the record of the mortgage may be amended in accordance with such decree by again recording the same. The answer of the defendant company was supported by affidavits. A hearing was had on the question whether, in accordance with the prayer of the complainant's bill, a preliminary injunction should go, restraining the defendant from further disposing of the stock of canned goods. On that hearing a preliminary injunction was refused to the complainant. The complainant has answered the defendant's cross-bill. He denies that the stock of goods of the defendant mortgagor was wrongfully inserted in the chattel mortgage, either by mistake or by any fraud or contrivance, and states that the mortgage was made to secure part of the purchase money to be paid for the conveyance of all the assets of the Anderson Preserving Company to the Anderson Food Company, part of which assets was the stock of goods, etc. The clause of the mortgage respecting the items to be included in the mortgage which the defendant mortgagor challenges was drafted by Mr. S. W. Beldon, the attorney for the defendant mortgagor, and included the "stock manufactured and unmanufactured or in process of manufacture," precisely as it is expressed in the chattel mortgage; that it was inserted in the chattel mortgage with the knowledge and assent of

said attorney for the defendant mortgagor; that, having been so inserted, it was read in full to Mr. Henderson, the secretary of the defendant mortgagor, who replied that it was "all right"; that the mortgage as so drawn remained in the possession of the attorney for the defendant mortgagor, and was by him brought, unexecuted, to the office of the attorney for the complainant, for the purpose of execution and settlement; that there were present at that meeting Mr. Beldon, the attorney for the defendant mortgagor, Mr. Cox, its president, Mr. Henderson, its secre tary, the complainant and his attorney, Mr. Harned, and the complainant's two sons; that the mortgage containing the clause now challenged was produced by the attorney for the defendant mortgagor; that attention was openly called to the fact that it was a chattel mortgage; that an affidavit of consideration was, in the presence of the parties, dictated, and was annexed to the mortgage by the attorney for the defendant mortgagor; and that it was then and there openly declared to all the parties present that the instrument was a mortgage upon the real and personal property about to be transferred from the Anderson Preserving Company to the defendant mortgagor, to secure $100,000 of the purchase price of the property mortgaged; and that thereupon the officers of the defendant mortgagor executed the mortgage in question with full knowledge of its contents, and so delivered it. On these pleadings the cause has come to final hearing.

John F. Harned and Jos. H. Gaskill, for complainant. S. C. Woodhull, S. W. Beldon, and D. J. Pancoast, for defendant.

GREY, V. C. (after stating the facts). The first question to be determined in this cause is that raised by the defendant's cross-bill, seeking to cancel the chattel mortgage set up in the complainant's original bill of complaint, or to reform it by striking out the words "stock manufactured and unmanufactured and in the process of manufacture." If the defendant is entitled to this relief, it will so alter the chattel mortgage upon which the complainant bases his equity that he could not be entitled to any injunction which would restrain the defendant mortgagor company from removing and pledging the stock of canned goods, etc., now included within the chattel mortgage. Has the defendant mortgagor shown that its chattel mortgage, as it is now expressed, was made to include the clause affecting the stock of goods by either fraudulent contrivance or by such a mistake as is correctible by this court? I think it may be safely said that there is not a particle of evidence in this cause which either shows or tends to show that the mortgagee, the Anderson Preserving Company, or those who acted for it, either as its officers or attorney, ever had any purpose or even thought of fraudulently introducing the clause in question into the chat

tel mortgage, and obtaining it to be executed by the defendant mortgagor company, or those who acted for it, without its knowledge or consent. All of the evidence touching the execution of the instrument goes to show that it came into existence with the clause in question not by the contrivance or planning of the mortgagee, or those who acted for it, but that the whole mortgage was a subject of conference and examination at first between the several attorneys of the mortgagor and the mortgagee, that the challenged clause was particularly referred to between those attorneys before it was inserted in the chattel mortgage, and the draft of that clause was actually made by the attorney for the defendant mortgagor. The instrument was thereafter, by the consent of all parties, retained in his possession unexecuted, with the most abundant opportunity for inspection, correction, change, or rejection. It was yet unsigned when brought to the place of meeting for settlement by the attorney for the mortgagor company, and although there is some contradiction as to the definite words used in making known the contents of the instrument at the time it was signed, acknowledged, proven, and delivered, yet I am satisfied that its contents were in fact then and there declared and made known in good faith to the parties who, acting for the defendant mortgagor, executed it, and those who acted for the defendant mortgagee accepted it as it is presently expressed. So far as the cross-bill charges or intimates that the mortgagee or those who acted for it had any fraudulent intent to insert in that mortgage the clause which the defendant mortgagor now seeks to have exercised, or that it was inserted by any fraudulent contrivance, the evidence entirely fails to sustain the allegation.

There is a prayer in the cross-bill which should be shortly noticed. It is asked as an alternative mode of relief that the complainant may be compelled to deliver up the chattel mortgage for cancellation. A decree that the mortgage shall be canceled is impossible under the circumstances of this case. This would require a restoration of the status of the parties which existed when the mortgage was delivered, which the cross-bill does not tender. There is nowhere in this case any offer to return to the mortgagee the property which the mortgage purchased. The evidence shows this is probably impossible. All parties since the mortgage was given have irretrievably changed their positions touching the subject-matter then dealt with. No claim has been made in argument that a cancellation of the mortgage is equitably possible, and this mode of relief must be rejected.

The cross-bill also asks that the chattel mortgage may be reformed by striking therefrom the clause "stock manufactured and unmanufactured and in the process of manufacture," or any other words of like import, wherever they may occur in the mortgage, because it is alleged those words were in

The

serted in the mortgage by a mistake. mortgage in question came to be made as follows: The complainant, Mr. Abraham Anderson, was the largest stockholder, so that he entirely controlled the Anderson Preserving Company, which in the year 1901 was engaged in the packing of fruits and vegetables in cans and the sale of the same. Mr. Anderson and Mr. John T. Cox in the latter part of the summer of that year entered into negotiations for the sale by Mr. Anderson of the Anderson Preserving Company to a company, not yet incorporated, to be known as the Anderson Food Company, which would be controlled and managed by Mr. Cox. Several written agreements were made between Mr. Anderson and Mr. Cox, which, because of disagreements between them, were abrogated, and new contracts made in their stead. Before the parties had come to an abiding agreement, the Anderson Food Company was, on August 15, 1901, incorporated by Mr. Cox, who subscribed for eight shares as an incorporator, Mr. David A. Henderson, who subscribed for one share, and Mr. Voorhees S. Anderson, who also subscribed for one share. The whole trend of the evidence in the cause shows that the Anderson Food Company was incorporated and controlled by Mr. Cox for the purpose of taking over all of the assets of the Anderson Preserving Company. Mr. Cox elected himself president of the Anderson Food Company, Mr. Henderson secretary, and Mr. Voorhees S. Anderson treasurer. There were several recessions and changes and perhaps temporary abandonments of the plan, but the negotiations were as often resumed between the parties. The first action taken by the newly organized Anderson Food Company, the mortgagor, looking towards the taking over of the property of the preserving company, was by a resolution of the stockholders of the Anderson Food Company, adopted by them at a stockholders' meeting held on September 5, 1901. The resolution is as follows: "Upon motion it was resolved and ordered that the board of directors be authorized to purchase from the Anderson Preserving Company its entire plant, including all of its assets, and subject to its liabilities, for a consideration of $1,000 in cash, $149,000 in capital stock for this Anderson Food Company, and a bond and mortgage be given by this Anderson Food Company upon said plant for the sum of $100,000, payable at the expiration of 10 years, with interest at the rate of 5% per annum." It will be noted that this resolution, in speaking of the thing to be purchased, refers to the entire plant of the Anderson Preserving Company, including all of the assets, and to a bond and mortgage to be given by the Anderson Food Company upon said plant. It is the fair construction of this resolution that the stockholders of the food company, in directing the making of the mortgage in question (obviously a purchase-money mortgage), intended and expected that the mortgage which they directed