Kea v. Epstein & Bros.

Bleckley, Chief Justice. 1. If the mortgage was tainted with fraud, it was with actual, not constructive, fraud. As to the existence of a large part of the debt which purported to be secured, there was no evidence, outside of the mortgage and the note described by it, except the testimony of the mortgagee; and he entered into no particulars as to time or place, but said that he had advanced or loaned to the mortgagor, before the mortgage was executed, about $600. He did not show how or where he 118 obtained tbe means to do this, and, according to the tax-books adduced in evidence, he possessed nothing taxable but his own head the year before or the year after the mortgage was executed. The amount secured was $1,200, and when the mortgage was taken the stock of goods embraced in it was valued by the mortgagee himself at that amount. Thus according to his testimony he added to a loan of about $600 previously made, a further loan of $400 when the mortgage was executed, with the understanding that more was still to be advanced to make up the sum secured by the mprtgage, and this was advanced afterwards. The jury could well believe that he would not hazard $1,200 upon a stock of goods worth no more than that sum, especially when by other evidence it ajipeared that the value of the stock was in fact only $800. Furthermore, the mortgage was kept off the records for nearly twelve months, and for more than two months after the mortgagor had made an assignment. Indeed it was not recorded until after the bill to set it aside had been filed. Another fact of some moment is that the note for $1,200 secured by the mortgage was not to become due until nine months and a half after its date, but contained no stipulation that it was to commence bearing interest until after maturity. There is no explanation in the evidence of why the mortgagee would or should allow the use of his money by the mortgager for such a length of time, and on such security, without compensation. The jury, it seems to us, were entitled to conclude, if they thought proper to do so, that about one half of the debt covered by the note and mortgage was fictitious. True, in arriving at this conclusion, they would have to discredit the mortgagee as a witness, but this, in view of his interest, would be allowable. They must be supposed to know whether his oath or the circumstances militating against his veracity should be preferred as a guide to truth. If so large a proportion of 119 the deht was fabricated, some actual fraud upon other creditors must have been intended by both the mortgagor and mortgagee. And if the mortgage was fraudulent, the assignment must also have been fraudulent; for it makes the mortgagee one of the preferred creditors to the extent of the whole amount of the mortgage debt, to wit, $1,200. Besides this, the assignment has another infirmity. One of the creditors was omitted from the schedule, and certain assets with which to pay him were left out of the assignment. This was done, not inadvertently, but by design, the intent being that the assets should afterwards be applied to the satisfaction of that creditor’s demand, which was done. 2. It is contended, however, that the mortgage would not be void because a part of the debt was fictitious, but would be good as to so much as was real and genuine. We think this position is not sustainable, if actual fraud was contemplated in fixing the. amount of the debt or pretended debt to be secured by the mortgage. Baldwin v. Short (N. Y. Feb. 1891), 26 N. E. Rep. 928. Says Chancellor Kent: “A deed fraudulent in fact is absolutely void, and is not permitted to stand as a security for any purpose of reimbursement or indemnity.” Boyd v. Dunlap, 1 Johns. Ch. 482. In Allen v. Brown, 43 Ga. 305, a decision of doubtful correctness, the parties, at the time the deed was executed, made separate stipulations as to each half of the lot covered by the deed. Here, on the contrary, there was no division of the property covered by the mortgage, contemplated or agreed upon. All of it was devoted alike to the legal and to the illegal object sought to be subserved by the execution of the mortgage. What the parties joined together for the consummation of a fraud, the court and jury called upon to defeat the fraud were not bound to put asunder. Judgment affirmed.