14 N.J. Eq. 213 | New York Court of Chancery | 1862
The bill is filed to foreclose a mortgage for $1000, given by William Robinson to Andrew Robinson, and by him assigned to th¿ complainant. The mortgage was executed and recorded on the first of October, ■1856, and was assigned to the complainant on the 11th of June, 1857, to secure the sum of $500, and by a subsequent assignment, acknowledged and recorded on the 9th of November, 1859, for the further consideration of $500, was unconditionally assigned to the complainant.
After the recording of the mortgage, but before its assignment to the complainant, judgments were recovered against the mortgagor, and the mortgaged premises levied upon by virtue of executions issued thereon. On the 21st of January, 1861, the premises were sold by virtue of these executions,
The answers allege, and the evidence proves that the bond and mortgage in their inception were fraudulent. They were given without consideration for the purpose of protecting the mortgagor’s property from his creditors. The fact is proved by the express testimony of the mortgagor and mortgagee, whose evidence in this particular is uncontradicted. Upon this point there is no controversy.
The answers further allege that the complainant took the assignment with full knowledge of the fraud, and without paying any consideration therefor. The complainant claims to be a bona fide purchaser for value without notice of the fraud. The burthen of proof is upon the defendants. The mortgagor testifies that, prior to the assignment, he informed the complainant that the mortgage was given to protect his-property from his creditors, and that the assignment was purely voluntary. Both facts are expressly denied by the complainant in his evidence. It is clearly shown that at the date of the first assignment, which was in the nature of an hypothecation of the mortgage to secure the payment of $500, the complainant gave to the assignor his check upon the State Bank at New Brunswick for $500; that on the same day the check was presented and paid to the assignor, and by him paid to the mortgagor. The mortgage thus assigned was held by the complainant as security for the $500 advanced until the 9th of November, 1859, and one year’s interest paid on the sum advanced. At or about the time of the absolute transfer of the mortgage, it is shown that Dan-bury, the complainant, became security to Stout & Company for the further sum of $500, for goods to be furnished to the mortgagor. Upon the faith of this guaranty, goods to the amount of $497 were furnished to Robinson, and the amount
Was the complainant a bona fide purchaser without notice of the fraud ? If he was not, if he took the assignment with knowledge of the fraud, the fact that he paid full consideration will not aid him. Robinson swears that Danbury had express notice of the fraud; that he told him, before either of the assignments were executed, that the mortgage was made without consideration for the purpose of protecting the property of the mortgagor from his creditors. This Dan-bury denies, and testifies that he never heard or knew of the fraud until Danbury was about to make sale of Robinson’s property under execution, long after the last assignment. The fact was then, for the first time, made known to him by Robinson, and disclosure was threatened if Danbury persisted in pressing his execution. Upon which side of this conflicting statement lies the probability? If the assignment to Danbury was purely voluntary, if he accepted the assignment for Robinson’s benefit merely to aid him in defrauding his creditors, it is highly probable that Robinson informed him of the real truth of the case. He must have done so to have given Danbury an inducement for his conduct! But the fact is established that Danbury advanced a full consideration for the mortgage; that ho took the assignments as security for the moneys advanced, and that they were made and placed upon record at the time of making the loans. It is not probable, while Robinson was seeking to obtain from Danbury a loan, and offering him security for its repayment, that he would have told him that the security offered was fraudulent and worthless.
It is further urged, that if the complainant be a bona fide purchaser of the mortgage without notice, his title is nevertheless invalid as against the creditors of the fraudulent mortgagor. It was so held by the Supreme Court of Connecticut, in Preston v. Crofut, 1 Conn. R. 527, and by Chancellor Kent, in Roberts v. Anderson, 3 Johns. Ch. R. 371. These cases distinguish between the operation of the statute 27 Eliz., ch. 4, intended to protect bona fide purchasers, and the statute 13 Eliz., ch. 5, made to protect creditors. They admit that, under the latter statute, a purchaser for a valuable consideration without notice from a fraudulent grantee will be preferred to a subsequent purchaser for a valuable consideration from the grantor. The first purchaser has in such case the preference whether he takes from the fraudulent grantor or grantee. But they maintain that, under the latter statute, a bona fide purchaser without notice from a fraudulent grantee acquires no title by the conveyance against the creditors of the fraudulent grantor. The distinction is not well founded.
The decision of the Chancellor in Roberts v. Anderson was unanimously reversed by the Court of Appeals, and the distinction made by the Chancellor in the construction of the two statutes declared to be without foundation. Anderson v. Roberts, 18 Johns. R. 515.
The subject is very fully examined by Chief Justice Spencer, in delivering the opinion of the Court of Appeals, and has been elaborately discussed and definitively settled in numerous other cases. Bean v. Smith, 2 Mason 252; Somes v. Brewer, 2 Pick. 198; Oriental Bank v. Haskins, 3 Metc. 332; Green v. Tanner, 8 Metc. 422; Dugan v. Vattier, 3 Blackf. 245.
" It is now the settled American doctrine that a bona fide purchaser for valuable consideration is protected under the statutes of 13th and 27th Elizabeth, as adopted in this country, whether he purchases from a fraudulent grantor or a
The rights of the bona fide purchaser from the fraudulent grantee are not impaired by the fact that judgments were recovered by the creditors against the fraudulent grantor prior to the conveyance by the fraudulent grantee. The judgments constitute no lien upon the legal title of the grantee.
The title acquired by the purchaser, according to every legal test, was perfect. A concealed defect or secret equity, arising from the conduct of those who previously owned the property, of which the purchaser had no notice, cannot bo set up against him. Fletcher v. Peck, 6 Cranch 133; Anderson v. Roberts, 18 Johns. R. 531.
The complainant is entitled to a decree according to the prayer of his bill. A reference will be ordered to ascertain the amount due upon the mortgage.