193 F. 153 | D. Nev. | 1911
This suit was brought by Henry Alter, as trustee in bankruptcy of the estates of W. L. Wallace and H. E. Blaisdell, individually and as copartners doing business under the firm name and style of Wallace & Blaisdell, and Wallace & Blaisdell, a copartnership, to procure a decree setting aside and annulling certain conveyances executed by the bankrupts to the defendant, A. - J. Clark. '
In September, 1903, Wallace & Blaisdell contracted with J. B. O’Sullivan for two lots in the town of Sparks. The price of the lots was $700. Of this amount they paid half in cash, giving their note for the balance, with interest at 6 per cent, per annum. Mr.
“To pay to tlic said party of the first part (Clark) the said sum of $3,000 in United States gold coin, on or before two years from date, with interest thereon at the rale of 0 per cent, per annum from date until paid, interest payable semiannually.”
They also agreed to pay all taxes levied on the property, and to keep it insured for not less than three years. If taxes or insurance were paid by Clark, the sums so paid were to be added to the $3,000, and draw 6 per cent, interest. It was further stipulated that, in case Blaisdell and Wallace failed to comply with the terms of this agreement, Clark should be released from all obligation in law or equity to convey the premises to them, and they should forfeit all rights thereto. On the cover of this agreement there is a receipt for one year’s interest, $180, dated January 16, 1905, and signed “A. J. Clark.” This deed was recorded the day of its execution. The agreement was never recorded.
There is in evidence a second deed from the same grantors to the same grantee, and also a similar agreement between them, both dated and executed more than one year later, January 18, 1905. In addition to the lots, this second deed conveys all merchandise, furniture, and fixtures on the premises. In the agreement Clark promises to sell, and Wallace and Blaisdell agree to buy, the property described in the deed for $5,000. with interest thereon at 8 per cent, per annum from January 16, 1905. Blaisdell and Wallace also agree to pay Clark “said sum of §5,000 in United States gold coin, on or before two years from date, with interest thereon at the rate of 8 per cent, per annum from the 16th day of January, 1905, interest payable semiannually.” They further agree to keep the buildings insured for not less than $5,000, and to pay all taxes. The contract concludes with a stipulation terminating the previous agreement, stating that the $3,-000 of the first contract is included in the $5,000; otherwise the terms of the two contracts are identical. This second deed and agreement were both recorded January 21, 1905.
The checks and check stubs in evidence show, in connection with -Clark’s testimony, that he let Blaisdell and Wallace have about $2,-
The allegation of the bill is that the deeds of December 11, 1903, and January 18, 1905, were in effect mortgages, and were given solely to enable defendant to avoid the payment of taxes. The averments as to the deed of May 17, 1905, are that it was given as security for the payment of all moneys due Clark from Wallace and Blaisdell, and also as security for a small additional amount loaned by defendant to Wallace during the month of May, 1905; that it constituted a discharge of the two previous deeds; that it was asked and given to enable defendant to defraud the state of Nevada of the taxes due on said loans; that Wallace, Blaisdell, and Wallace & Blaisdell were insolvent when the last deed was given, a fact well known to defendant at and before the time of his taking such deed; that said deed was given by said bankrupt and accepted by defendant, with intent to prefer defendant as a creditor of said bankrupts, and with further intent to hinder, delay, and defraud other creditors of their “lawful debts and demands, *. * * and by reason of such fraud said deed is null and void.”
“shall be valid for any purpose as against other than the parties tlieretu unless there be appended or annexed 1 hereto the affidavits of the mortgagor and mortgagee, or some person in their behalf, setting forth lhat the mortgage is made in good faith, and given for a debt actually owing from the mortgagor, stating the amount and character of such debt, and that the same is not made to hinder, delay or defraud any creditor of the mortgagor.”
The deeds to Clark, in so far as they convey or áttempt to convey personalty, are therefore void as against plaintiff. The rents collected by the trustee cannot he recovered by defendant.
“A mortgage of real property shall not be deemed a conveyance, whatever i1s term, so as to enable the owner of the mortgage to recover pos.session of the real property without a foreclosure and sale.”
So long as Blaisdell and Wallace remained in possession of the property, they were entitled to apply its rents, issues, and profits to their own use. Their contract was to pay interest, not rent. When the trustee in bankruptcy took possession of the property, he took it “with the title of the bankrupt,” and with the same right to retain the rents prior to foreclosure, which the bankrupt had while they remained in possession. 1 Jones on Mortgages, §§ 670, 771; Teal v. Walker, 111 U. S. 242, 4 Sup. Ct. 420, 23 L. Ed. 415.
Section 1084 requires the county assessor to demand from each person “a statement under oath or affirmation of all the real estate or personal property (and this includes moneys secured by mortgage or otherwise) within the county, owned or claimed by such person.” .Refusal or failure to make such a statement on demand is a misdemeanor, and an affidavit knowingly false is perjury. The assessor in such case must estimate the value of the property himself, and assess it accordingly. The statute has thus made ample provision for the discovery and ascertainment of all loans secured by deed rather than mortgage, and also for the punishment of those who fail or refuse to give in their property to the assessor. If the assessor had performed his duty by requiring a sworn statement from Mr. Clark, the money loaned by him to Blaisdell and Wallace would undoubtedly have been listed and taxed.
Drexler v. Tyrrell, 15 Nev. 114, cited by plaintiff, was a suit to foreclose a mortgage. The money was loaned by one resident of this state to another, but, at the request of the lender, the mortgage was executed to a citizen of California, for the purpose of preventing an assessment, and thus evading the payment of taxes. Executing this mortgage to a nonresident was equivalent to a representation that the money loaned belonged to a nonresident, and therefore could not be assessed in this state. It was held by a divided court that the purpose to evade payment of taxes and to prevent assessment of the money loaned tainted the whole contract, and that such contract could not be enforced in favor of a party at whose instance and for whose benefit it was entered into. The rule to be gathered from the authorities cited by Justice Leonard is that, if a contract sought to be enforced is expressly or impliedly forbidden by statute or by common law, no court will lend its assistance to give it effect, but, when the consideration and the matter to be performed are both legal, and the illegality is collateral and incidental, and occurs in carrying the contract into effect, but does not enter into or form a part thereof, and is not contemplated thereby, it will not preclude a recovery. This undoubtedly is a correct expression of the law, but its application-to the facts in Drexler v. Tyrrell .has never been approved in but one court outside Nevada, so far as I have learned. Elsewhere it has been severely, and I think justly, criticized.
' In Nichols v. Weed Sewing Machine Co., 27 Hun (N. Y.) 200, 206, the court says:
“We have examined the case of Drexler v. Tyrrell, 15 Nev. 114, * * * and we do not think it correct or sustained by the citations. As we think, the opinion fails to appreciate that there is no illegality in the contract of loan.”
In a note in 1 Jones on Mortgages, appended to section 619, the author criticize., Drexler v. Tyrrell in the following language:
“But the cases, cited in support of the decision are eases in which the consideration of the contract, as between the parties themselves, was either illegal or contravened the policy of the law. In the case before the court, however, there was nothing illegal in the contract as between the parties.*159 It was a contract they were not prohibited from making, and tiiere was a full and complete consideration for it. The only taint in the transaction was the intended fraud upon the revenue laws of the state. For this intended fraud the court upheld the mortgagor in refusing payment of the mortgage. They upheld him in a monstrous injustice, when the revenue laws of the state provided proper and ample punishment for an evasion of them by criminal prosecution. The decision is regarded as wrong in principle.”
In Callicott v. Allen, 31 Ind. App. 561, 67 N. E. 196, speaking of the same case, the court says:
‘•tVe do not think the decision rests upon sound reason or good law.”
In Crowns v. Forest Land Co., 99 Wis. 103, 74 N. W. 546, the Court says of the Nevada case:
•‘It has never been recognized as authority outside of its boundaries so far as we have been abb; to discover: on the contrary, it has been severely and justly erifieized'in other jurisdictions, and is regarded as wrong in principle.”
Judge Ross in Waterbury v. McKinnon, 146 Fed. 737, 77 C. C. A. 294, says that the Nevada decision is not sound.
There is no law in Nevada which prohibits the taking of an absolute deed as security for a loan. There is nothing illegal in such a contract. My attention has not been called to any statute declaring void a deed given as security executed and received in order to enable the lender to evade his taxes. The deeds and the defeasances in this case simply rendered Clark's money more difficult of discovery. No more difficult, however, than if he had taken a promissory note without security, or made the loan merely upon an oral promise to repay. Loaning money on a promissory note certainly is not against public policy. I am of the opinion that, if Mr. Clark took a deed rather (han a mortgage because he might thereby more easily avoid the payment of his taxes, it was a matter collateral to the contract between himself and the bankrupts. This conclusion is abundantly supported by the following authorities: Crowns v. Forest Land Co., 99 Wis. 103, 74 N. W. 546; Nichols v. Weed Sewing Mach. Co., 27 Hun (N. Y.) 200, 206; Id., 97 N. Y. 650; 27 Cyc. 1127; Gilmore v. Roberts, 79 Wis. 450. 48 N. W. 522; McKinnon v. Waterbury ,(C. C.) 136 Fed. 489; Waterbury v. McKinnon, 146 Fed. 737, 77 C. C. A. 294; 1 Jones on Mortgages, § 619; Callicott v. Allen, 31 Ind. App. 561, 67 N. E. 496; Stilwell v. Corwin, 55 Ind. 433, 23 Am. Rep. 672; Hanover National Bank v. First National Bank, 109 Fed. 421, 426, 48 C. C. A. 482.
The deed and agreement dated May 11th were given within four months prior to the filing of the petition. The proof on this hearing that these instruments were given with intent 'to defraud other creditors, that either Wallace or Clark was actuated by such a purpose, is insufficient. Furthermore, the last deed was either in lieu of or in renewal of previous securities. The real property mortgaged is the same in all the deeds. It is not shown that Clark at the time knew that Wallace was insolvent, or had other creditors. Apparently the deed was taken by him to protect his own rights. Chattanooga National Bank v. Rome Iron Co. (C. C.) 102 Fed. 755, 757.
The deeds as mortgages of realty are valid. In so far as they were intended to convey or mortgage personal property, they are invalid as against complainant. Defendant is not entitled to rents collected by plaintiff.
Counsel may prepare findings and a decree in accordance with the opinion above expressed.