Ledyard v. Chapin

Perkins, J. Bill in chancery by Small, Williams Sf Co. and Chapin, for the use, &c., against Ledyard and others, to procure the removal of a cloud hanging over the title to real estate. Decree below for the plaintiffs. The plaintiffs in the bill obtained judgments at law against one Barbour, took out executions and levied them upon certain real estate of which they claimed that he was the beneficial owner, but which was incumbered by a mortgage executed to the American Life Insurance and Trust Company, and assigned to one Ledyard, for, of principal and interest, near 15,000 dollars, an amount greater than the value of the lands mortgaged. Barbour has no other property out of which the judgments can be collected, and the judgment and execution-plaintiffs have a right, therefore, to this bill to remove the incumbrance, if invalid. The record is one of great length, but the point is in a nutshell, and turns upon a simple question of fact. Ba/rbour executed the mortgage in question, to be used by Smith as collateral security for a loan to be made to himself by the Life Insurance and Trust Company above mentioned. It was deposited with other securities by Smith with that company, and a loan obtained. Subsequently it was arranged that the securities might be successively redeemed and withdrawn, by paying the proportion of the loan respectively assessed upon each. On this mortgage by Barbour the assessment was a fraction over 1,000 dollars. At this stage, Smith makes an arrangement with Ledyard, that if he will pay him, Smith, 2,000 [321] dollars, he will have the insurance company, when he redeems the mortgage, assign it over to him, Ledyard; and accordingly Smith pays the insurance company 1,050 dollars, withdraws the mortgage, gets the company to place upon it an assignment to Ledyard, to whom Smith delivers it, and receives his 2,000 dollars for a seven per cent. 10,000 dollar mortgage. Ledyard is now seeking to enforce this mortgage, amounting to about 15,000 dollars, against Barbour’s real estate, Barbour never having received any consideration for the mortgage. Ledyard undoubtedly knew all the circumstances. If he did not, he must have been grossly careless and stupid. J. L. Jernegan, for the appellants. J. A. Liston and J. W. Gordon, for the appellees. When the mortgage was taken up by paying the amount it was deposited to secure, it was functus officio and dead, and could be no longer available in the hands of any one. This fact disposes of the case, and at the same time shows it to be fraud on the part of Smith and Ledyard to seek to enforce it—a fraud upon Barbour and his creditors, unless, indeed, which may be the case, Barbour is a secret party to the transaction between Smith and Ledyard, and to reap, or share in, the benefit expected to be derived from it; and, at all events, a fraud upon Barbour's creditors. Per Curiam. The decree is affirmed with costs.