Stover v. Herrington

COLLIER, C. J. In Shirras, et al. v. Craig & Mitchell, 7 Cranch’s Rep. 34, a suit was brought for the foreclosure of a mortgage, and it was objected to the validity of the deed that it did not truly state the mortgagor’s indebtedness, but greatly exaggerated it. The Court said, “ It is true that the real transaction does not appear on the face of the mortgage. The deed purports to secure a debt of £30,000 sterling, due to all the mortgagees. It was really intended to secure different sums, due at the time to particular mortgagees, advances af-terwards to be made, and liabilities to be incurred to an uncertain amount. It is not to be denied that a deed which misrepresents the transaction it recites, and the consideration on which it is executed, is liable to suspicion. It must sustain a rigorous examination. It is certainly always advisable fairly and plainly to state the truth. But. if upon investigation the real transaction shall appear to be fair, though somewhat variant from that which is described, it would seem to be unjust and unprecedented to deprive the person claiming under the deed, of his real equitable rights, unless it be in favor of a person who has been in fact injured and deceived by the misrep151 resehtation.” [Doe, ex dem. Duval’s heirs v. McLoskey, 1 Ala. Rep. N. S. 736-7.] So in Prince v. Shepard, 9 Pick. Rep. 176, the debt described in a conveyance for the creditor’s benefit exceeded the amount really due, yet it was held that this might be explained so as to rebut the presumption of fraud. The statement of the consideration in the mortgage at a sum much greater than what was really due, is at most only presumptive evidence of fraud. [Parker v. Barker, 2 Metc. Rep. 423.] Although no consideration be mentioned in a deed, yet it is not for that cause void; for every deed imports a consideration, and it devolves on the party who alledges the reverse to offer proof of the want of it. [Boynton v. Rees, 8 Pick. Rep. 329; Clapp v. Terrell, 20 Pick. Rep. 250.] So it has been held that a conveyance originally void as against creditors in consequence of fraud, may acquire validity, if the fraudulent intent be abandoned, and the confirmation of the conveyance made for adequate consideration. [Oriental Bank v. Harkins, 3 Metc. Rep. 332.] And a mortgage or other transfer of property executed with intent to defraud creditors cannot be avoided by them, unless the grantee participated in the fraudulent intent. [Jones v. Norris, 2 Ala. Rep. 526; Harrison v. Phillip’s Academy, 12 Mass. Rep. 456 ; Foster v. Hall, 12 Pick. Rep. 89; Bridge v. Eggleston, 14 Mass. Rep. 250; Johnson v. Johnson, 3 Metc. Rep. 63.] Nor can a fraudulent grantee be treated as a trustee of the grantor, if he has paid bona Jide, debts of the grantor to the full amount of the property received — (Thomas v. Goodwin, 12 Mass. Rep. 140) —and if he has paid a less amount he shall be entitled to a deduction pro tanto if there are no paramount liens. [Parker v. Barker, 3 Metc. Rep. 423. See also Burnett v. Stanton & Pollard, 2 Ala. Rep. 190; Cummins & Cooper v. McCullough, 5 Alabama Rep. 324.] Sometimes the question of fraud vel non is determined upon an inspection of the deed without the aid of extrinsic proof. [Ashurst v. Martin, 9 Porter’s Rep. 566; Gazzam v. Poyntz, 4 Ala. Rep. 372.] But in the present case it is not insisted that the mortgage itself discovers a legal objection, but that it is defective, because it does not truly state the consideration : and this fact is brought to the view of the Court [152] by testimony aliunde, in this aspect of the case the existence' of fraud must depend upon the intention of the parties as shown by the proof, or inferred from established facts. [See the cases last cited, also Wadsworth v. Marsh, 9 Conn. Rep. 481; Jackson v. Mather, 7 Cow. Rep. 304.] If the view taken of the law be correct, there can be no ■question that the depositions explanatory of the circumstances under which the mortgage was executed, and for the purpose of showing the extent of the mortgagor’s indebtedness, are clearly admissible. And it is equally clear that they do not show the complainant to be guilty of a fraud in obtaining the mortgage. The statement of an exaggerated consideration, in the language of some of the cases cited, is at most prima facie evidence of fraud, and may be repelled by showing the fairness of intention on the part of the mortgagee. This has been done by the testimony in the cause, which .very1 satisfactorily shows that the complainant did not intend to deceive any one; and that the consideration was misstated, because the amount for which he was the surety of Herrington was unknown to them at the time the mortgage was executed.? ■and perhaps it was the only form in which the security could be obtained ; the mortgagor may, and most probably did, intend to defraud his creditors, but this we have seen cannot .prejudice the complainant, who" did not concur in such a purpose. That there was a consideration for the mortgage, as well as the amount of it, is well established by the proof. The complainant claimed nothing more than was really due,- and thus far we have seen his lien may be sustained. The purchase by the complainant of two of the slaves embraced by the mortgage, cannot impair his lien as to the others. It cannot be inferred that he intended thereby to assist in defrauding the creditors of Herrington. The presumption from the proof is, that he esteemed the security sufficient for his indemnity without these slaves, or if not, that he' considered it most beneficial to himself to purchase them in extinguishment of another debt that was due him from the' mortgagor. Nor is fraud a legal conclusion from the fact, that the complainant became Herrington’s surety in a bond' for a writ of error, sued out to revise a judgment upon one of the notes against which it was the object of the mortgage te> [153] indemnify him. Perhaps it may have been supposed that the judgment would be avoided in foto, the complainant absolved from liability to pay the note, and his lien of course discharged. Be this as it may, jt would seem from the proof that he did not act from a sinister motive, but was forced to execute the bond1 in order to obtain the two slaves. The complainant was certainly mistaken, in supposing that he could enforce the lien of his mortgae, by causing an execution to be levied on the mortgaged property, while there were older executions in the sheriff’s hands against the mortgagor’s estate. But this cannot operate as an estoppel, so as to preclude him from showing that he never intended to abandon the mortgage. The proof, instead of showing that he contemplated such' a purpose, warrants the inference, that he supposed the execution when enforced for his benefit, acquired potency from the mortgage. This accounts for the solicitude felt and efforts made by the complainant, to cause the lands to sell for a fair market value at the sheriff’s sale. He was doubtless of opinion that his interest as a mortgagee would prevent competition, and the advertisement put up in different places, was intended to encourage bidders by quieting their apprehensions as to the title. We have seen that the evidence instead of connecting the complainant with the fraud (if any) which was purposed by Herrington, entirely exculpates him. The fact that the latter was embarrassed and conveyed his entire estate, considering, that the only object of the complainant was to indemnify himself against the consequences of his suretyship, cannot in any manner affect the validity of the mortgage. A party though indebted beyond his means of payment may prefer one creditor to all others, and transfer to him or for his security, all his property, where there are no paramount liens upon it. There may perhaps be cases, where the disproportion between the liability intended to be secured and the property conveyed is so great as to authorize the presumption of fraud; but the present is not a case of that character. It is clear that the mortgage imparted no aid to the execution under which the complainant purchased, and consequently he acquired no title as against the judgment and older fieri facias under which Bonner claims. The purchase by Burns [154] of the slave Jane was good against an execution, the lien of which was not previously operative. This being the case, the complainant is remediless unless Chancery can interpose, and administer relief. From the cause, as presented to us, there is nothing attributable to him incompatible with honesty of intention; nor is any sufficient reason shown, why the sales to Bonner and Burns should not be avoided; and the purchases by the complainant declared , to be null; especially upon his stipulating that the property should sell for as much as it did under the execution sale at which he purchased; This being done, no objection is perceived in the present posture of the case to a foreclosure of the mortgage, and a decree for the sale of the property embraced by it. That the cause may be proceeded in according to the principles of equity and the rules of procedure therein, the decree of the Court of Chancery is reversed, and the cause remanded, at the cost of the defendants in error.