Hall v. Erwin

60 Barb. 349 | N.Y. Sup. Ct. | 1871

By the Court, Johnson, J.

The action is to foreclose a mortgage given by the defendant to Jabez It. Ward. The plaintiff claims to be the owner of the mortgage, by virtue of an assignment from Ward, the mortgagee.

The defense is, in substance, that the plaintiff is not the owner of the mortgage, and never acquired any title thereto, by virtue of his pretended assignment, and that the defendant has paid the mortgage debt in full to the mortgagee, who was the real owner, and who has duly satisfied and discharged the same. There is no dispute about the facts of the case. •

The testimony of Ward, the mortgagee, and of the plaintiff, agrees in all substantial and material respects. There is no question in the case as to the admissibility of evidence, except in regard to a single item of evidence which is entirely immaterial. The naked question is presented, upon the undisputed facts, whether the plaintiff obtained any title to the bond and mortgage in question, which he can enforce against the mortgagor, who has paid the same to the mortgagee, and taken a full discharge. That the plaintiff had the apparent title cannot be disputed. ISTor is there any doubt that the defendant paid the mortgage with full notice, and knowledge of the plaintiff’s claim to be the assignee and owner. He knew all the facts as they now appear in evidence. Whoever was the lawful owner of the bond and mortgage, was the defendant’s creditor, and to him the debt was owing, and could not be discharged by payment to another. When the defendant, therefore, acting upon the notice he had, elected to pay the debt to the mortgagee, he assumed the risk of proving that such mortgagee- was in fact and in law his creditor, who had the legal right to demand and receive payment as against the apparent assignee and owner. The defendant has unquestionably the right to show, if he can, that he has paid the debt to one who owned it, and had the clear right to receive payment. We come, then, to the question of the plaintiff’s title. How did he acquire it? Is he a purchaser, and if so, when did he become a purchaser ? Apparently, and upon the face of the paper merely, he is assignee and purchaser for a valuable consideration. But what is the real fact ? The testimony shows, clearly and beyond any dipute or cavil, that he refused to purchase the bond and mortgage when the mortgagee offered to sell them to him, and agreed to take them to sell as a broker for the mortgagee, for a compensation agreed upon, and that the assignment was given to him to enable him to negotiate and transfer a title to a purchaser, more conveniently and advantageously, and for no other purpose. By the agreement he became the agent or factor, or trustee, of the mortgagee, for a specific purpose, and the assignment was given to him not for the purpose of constituting him assignee and owner, but merely as an evidence of his authority and right to sell and transfer a title. The plaintiff was, at this time, a judgment creditor of the mortgagee, the balance due on his judgment being about $700. Execution had been issued and property levied upon sufficient to secure the debt. It was part of the agreement that, out of the avails of the sale of the bond and mortgage, the plaintiff should retain sufficient to satisfy this judgment, and release the levy, and then pay over the balance to the mortgagee, less his compensation. But the plaintiff, after having obtained his assignment in this manner, deliberately refused to sell and assign the bond and mortgage, but elected to keep the same as his own property and pay the mortgagee nothing. He refused even to satisfy the judgment on which the levy was made, and the levy yet stands as a satisfaction of that judgment. He did not even elect to become a purchaser, if he could have done so in view of his relation to the mortgagee. He elected to take it, himself, in defiance of his agreement, and in flagrant violation of his employment and trust.

There can be no doubt, upon the evidence, that the real relation of assignor and assignee, and the consequent relation of debtor and creditor, in reference to the bond and mortgage, was never contracted and never existed between the mortgagee and the plaintiff. It was not the subject of the negotiation and bargain between them. That was just the relation that the plaintiff refused to bargain for and to assume. The relation they did bargain for, and contract, by their agreement, was that of principal and broker, or factor, and nothing else. The plaintiff obtained his color of title by falsely pretending that he did not wish to become assignee and owner, but was willing to act as broker, for a consideration agreed upon, and by artful and deceitful promises which, at the time they were made, he confessedly never intended to perform. The plaintiff does not pretend that he ever intended to raise and pay over the money, and his whole course of conduct shows clearly that he did not. He obtained his formal assignment simply by false pretenses, specious promises, and false lights, held out to one under the most imminent stress of pecuniary needs and difficulties. The law does not confer titles, and give rights of action, through such means. To allow such a stroke of financiering to succeed would be repugnant to every idea of justice, and shock the moral sense.

It is claimed in behalf of the plaintiff, that the defendant has no right to inquire into the particulars of the bargain between the plaintiff* and the mortgagee. That inasmuch as the assignment in question was made with the intent, and for the express purpose, of having the title to the bond and mortgage transferred from the mortgagee, it is of no consequence to the defendant, whether the plaintiff has acted in good faith with the mortgagee, or not; that the assignment is conclusive upon the defendant. This was the view which seems to have been taken at special term, as appears from the opinion of the learned justice before whom the action was tried. It was there held that whatever might be the rights and equities of the mortgagee against the plaintiff, they were not available to the defendant, who was not privy to the arrangement, and was in no way interested therein when it was made. But this argument proceeds rather upon form and color than substance. The rule is quite different when the assignee holds moda files. Ex dolo malo non oritur actio, is a maxim of very wide, if not universal application. It applies even to the holder of commercial paper, and more strongly to assignees of choses in action. It has been held in the case of a negotiable note, that if the defendant can show that the plaintiff obtained it by his own fraudulent act, he has a right to defeat the action on that ground, although he may be liable to pay the note to the true owner. Oakley, J., in delivering the opinion in Talman v. Gilson, (1 Hall, 308,) says: “ This proceeds on the general doctrine that no man can acquire a right by his own fraud, to sustain an action in any court; and it is a principle of universal application.” (City Bank of New Haven v. Perkins, 29 N. Y. 554.) It is a question of title, and right of action, which a defendant may always controvert by way of defense. Fraud avoids all contracts, and transfers of title, into which it enters, at the election of the party defrauded. That the mortgagee here elected to repudiate the plaintiff’s claim of title, and took measures to defeat it, of which the plaintiff had due notice, is undeniable.

It is said, however, that in any event the plaintiff, by the agreement, coupled with the formal assignment, acquired a right and equity in the bond and mortgage, to the extent of his judgment of $700, which he had the right to pay and satisfy out of the avails, when the securities should be negotiated aud assigned. But it is a fundamental rule of equity, not to recognize or protect any claim which is presented by unclean hands. In addition to this, moreover, the evidence shows that after the plaintiff had made up his mind to keep the bond and mortgage, and set up title to it under his assignment, he refused to satisfy that judgment out of it, and forbade the sheriff to release his levy. He retains his levy contrary to the agreement, and the judgment must be deemed to be satisfied by the levy, while it remains. It is too late for him now to fall back upon that right, which he has once so unjustly disclaimed and cast aside. The whole case exhibits, most unmistakably, a deliberate plan and scheme on the part of the plaintiff, to obtain by artifice and deceit, a formal assignment of the bond and mortgage, and then to set up title and seek to hold them, in satisfaction of, or as a counterclaim to, another demand, which he had shortly before purchased against the mortgagee and a third person, and which he knew the mortgagee was unable and unwilling to pay in that way. But the plaintiff has not attempted to apply the bond and mortgage, or the value thereof, in satisfaction of that claim even. On the contrary, he has resisted such application, when sought to be enforced by the third person and party to the last indebtedness. He has paid nothing on account of the bond and mortgage, to any one, and refuses to perform any part of the agreement on which he obtained possession and a formal transfer of those instruments. It appears to me a very plain case, of a party attempting to obtain title and a right of action, through sheer deceit and fraud ; which the law will neither uphold nor tolerate. The court, at special term, erred, therefore, in holding that the plaintiff", by means of that transaction, had required a title to the bond and mortgage, and a right of action against the defendant.

[Fourth Department, General Term, at Rochester, September 4, 1871.

The judgment must, therefore, he reversed, and judgment ordered for the defendant, for his costs of the action and the appeal.

Mullin, P. J., and Johnson and Talcott, Justices.]