Birge v. Nock

Carpenter, J. It has been judicially determined that the deed from Thomas G. Nock and wife to Hiram Nott, dated October 24th, 1857, was fraudulent and void as against the creditors of Royal Prouty. The question of fraud then in respect to that deed is no longer an open one. It is not expressly found that the deed from Nott to George F. Nock, dated October 7th, 1858, was fraudulent; but we-think the facts found are equivalent to that, and clearly show that it was given in pursuance of the same fraudulent design, and therefore void. ■ So also was the mortgage deed from George F. Nock to Philip Norton, at least so far as this defendant is concerned. That he negotiated the loan to secure which the mortgage was given, and signed the note as a joint maker thereof, is expressly found. That he had the avails thereof is fairly inferable, as it no where appears that George F. Nock ever had any real interest in the premises. That he was a party to all this fraud, if not the principal instigator thereof, the history of this case abundantly proves. He now seeks to avail himself of all the advantages intended to be derived from such fraud, and retain the possession of the property, which he has thus far succeeded in withholding from his own and Prouty’s creditors. He attempts to do this by setting up, as a defense to this action, the interest of Philip [166] Norton in the premises as mortgagee, and a lease from Norton to himself. The mortgage debt was originally one thousand dollars. The value of the property mortgaged is not directly found, but it would seem to be at least double the amount of the mortgage debt; so that there is an interest outstanding in some one equal to or greater than that of the mortgagee, admitting that his mortgage is a valid one. The decree of the superior court vested the absolute title to the property in Lucius B. Chapman, as trustee, subject only to such rights as Norton acquired by his mortgage. If that mortgage was invalid the trustee took the absolute fee, and the plaintiff’s right to recover cannot be questioned. If it is valid, the title vested subject to the mortgage, and the plaintiff must now be regarded as the owner of the equity of redemption. Upon that assumption the plaintiff stands upon the footing of a mortgagor after the expiration of the law day and while the mortgage is still outstanding. That a mortgagor cannot maintain ejectment against the mortgagee under such circumstances is' well settled. The same rule applies to an assignee, or other party who in good faith claims title under the mortgagee. But a stranger, who has no interest in the debt or land, cannot set up an outstanding mortgage as a defense to an action of ejectment brought by the mortgagor. Porter v. Seeley, 13 Conn., 564. As between such parties the legal title of the plaintiff is complete notwithstanding the mortgage. It being established that a mortgagor may, under some circumstances, recover the possession of the mortgaged premises in an action of ejectment against a stranger, while the legal title is still outstanding in the mortgagee, let us next inquire whether this defendant sustains such a relation to the subject matter in dispute as that this plaintiff ought not to recover. The design of the mortgage to Philip Norton was, as we have already seen, a fraudulent one on the part of the defendant and George F. Nock. The object was to avoid the debts of the defendant, and the debts of Royal Prouty, which [167] to some extent were identical. The plaintiff succeeds to the rights and stands in the place of the creditors whose debts are sought to be avoided. The defendant is himself the principal party to the fraud. As between these parties the statute against fraudulent conveyances declares the mortgage to be “ utterly void.” It follows therefore that the defendant is not in a situation to avail himself of a conveyance procured by his own fraud, especially when he attempts to do so in furtherance of his fraudulent purpose. But there exists between Norton and the defendant the relation of landlord and tenant; and it may be said that the possession of the tenant is the possession of the landlord, and that a judgment against a tenant is equivalent to a judgment against a landlord on account of the privity existing between them. This may be so as a general rule, but we think this case is an exception to the rule. .The tenancy was a .fraudulent one. The design was, not to protect the interest of the mortgagee, but to place the defendant in a situation to retain,, so to speak, the possession of the equity of redemption. The defendant was in possession as real owner, the record title being in a third party. Pending a suit for the legal title by creditors, a mortgage is given to secure a debt of less than half the value of the property. The mortgagor thereupon nominally surrenders the possession to the mortgagee, and immediately takes a lease from him, by which he retains the possession of the property as before. It is not usual’for a mortgagee, when his debt is abundantly secured, to take immediate possession of the property mortgaged. The design of a mortgage is to secure a debt, and it is treated as security merely, both in law and equity. Generally the mortgagor remains in possession, being regarded as real owner for most purposes, until the mortgagee finds it necessary, for the security of his debt, to take possession. This is- usually done in connection with a petition for a foreclosure ; and the ordinary practice is for the court, in the action of ejectment, to stay execution until the decree of foreclosure becomes absolute. When therefore the mortgagor, at the inception of the mortgage, goes through the formality of giving possession to the mort [168] gagee, and immediately takes a lease from him, thus leaving the actual visible possession precisely as it was before, and precisely as the law would have left it without this formality, we naturally look upon the transaction with suspicion, to say the least. And when surrounded with circumstances similar to those surrounding the one now under consideration, we have no hesitation in declaring it fraudulent. We must therefore regard this lease as a part of a series of fraudulent acts, by which the defendant is attempting to- place his property beyond the reach of creditors, and as such it is void as against such creditors. If we are right in this view of the case, neither the mortgage nor the lease, nor the two combined, will constitute a defense to this action, unless it becomes necessary so to hold in order to protect the interests of the mortgagee. We do not intend to decide upon the validity of Norton’s mortgage. We have therefore purposely avoided expressing any opinion upon that question. But we have assumed, for the purposes of this case, that it was valid. Assuming that, and the result of our decision is merely to take the equity of redemption out of the- hands of the fraudulent mortgagor, and place it where it rightfully belongs, at the disposal of his creditors, leaving the mortgagee to all the rights, whatever they are, which he legitimately acquired by his mortgage. By doing so we cannot see that we do him any essential harm, or impair in the least the extent of his security ; while on the other hand, if we leave the property in the defendant’s possession, we not only countenance the fraud, but aid him in its consummation, and secure to him, partially at least, the fruits of it, besides delaying and hindering the creditors. For these reasons we think the superior court erred in rendering judgment for the defendant. A new trial must be granted. In this opinion the other Judges concurred; except Mc-Curdy, J., who dissented.