Marston v. Brackett

| Superior Court of New Hampshire | Dec 15, 1838

The opinion of the court upon the several motions and questions raised in the case, was delivered by—

Parkek, C. J.

The motion to suppress the testimony taken in this case cannot prevail. The statute, in enacting that the proceedings to be had, in pursuance of the provisions conferring chancery jurisdiction, should be in conformity with the usual practice of courts of chancery in like cases, did not intend to regulate a mere matter of practice, of the character of the one now in question, but to provide that the proceedings should be by bill and answer, decree, &e., and on the principles of decision adopted in chancery, so far as they were not repugnant to the laws of the state. The same statute confers upon this court the power to make all necessary rales for the conducting of the business in the same, &c. Had the statute intended to require us to follow all the rules of practice in courts of chancery, we should in many cases find it somewhat difficult to execute it, on account of the different rules prevailing upon some subjects in the courts of England, and those of this country.

Up to this time we have adopted no general rule upon the subject matter which forms the foundation of this motion. The practice in taking depositions to be used at law, is for the parties to be present, and put interrogatories viva voce. This is liable in some cases to abuse ; and it may be found expedient to regulate this matter hereafter by a rule. In one case in chancery, on motion and cause shown, a special order was entered that the parties should not be present at the taking of the testimony. Probably that may have been practised in other cases. There are undoubtedly instances in which such a course would prevent the party from availing himself fully of the testimony which the witness was able to give ; and until the matter is otherwise regulated we shall permit the parties and counsel to be present at the examination, and to put interrogatories in writing, through the commissioner, in aid of the interrogatories filed in the cause, for the purpose of drawing out whatever knowledge the witness may have on the subjects embraced in the interrogatories filed : but in no case to address the witness, or make any suggestion to him, or to the commissioner, or in any other way to interfere with the examination. If there are evils in permitting the parties to have a knowledge of the testimony before a formal publication, there are also evils incident to a contrary course ; and it may be well to ascertain the practical operation of the rule we now adopt. As no rule had been adopted when this testimony was taken, and no abuse is suggested, we see no reason for suppressing it.

The motion to suppress the testimony of John P. Marston and wife, is placed upon two grounds ; one that he is incompetent to prove a deed made by himself, fraudulent, and the other that he cannot be admitted to prove a negotiable note originally fraudulent, to which he has given credit by his signature.

If the objection to the testimony of John P. Marston were well founded on both grounds, he would be excluded, not on account of interest in the event of the suit, but from reasons of public policy,because the law would not permit him thus to defeat his own acts : and it might well be questioned whether the exclusion should extend to the wife, to whom the grantee or payee had in no way trusted, and who would not be giving testimony to invalidate any act of her own. A woman may be a witness between third persons in cases where she could not be so if her husband was a party. 1 Strange 504, Williams vs. Johnson. But it is unnecessary to settle that here, as we are of opinion that the testimony of John P. Marston may well be received in this case.

This case does not necessarily involve the question whether a grantor, who has conveyed land by warrantee deed, can afterwards be permitted, in favor of a creditor who has levied upon the land, or of any other person claiming title against such conveyance, to give evidence that the deed was fraudulent; for the testimony in this case is not offered merely to prove the mortgage to the defendant to have been fraudulent at the time when it was made. That matter appears to be merely introductory to the further fact, that after it was so made, no consideration in truth existing for the note to the defendant, that note was given up to Marston’s wife, at his request, and that at the time when the plaintiff took his conveyance the defendant had no debt, or evidence of any debt, in support of his mortgage: That it in fact stood at that time as a satisfied mortgage, although the satisfaction had not been entered of record. We see no objection whatever to the competency of this testimony. A party who had given a mortgage, and afterwards conveyed the land, if released from his covenants might well be a witness to show that prior to the latter conveyance, the debt upon which the mortgage was predicated had been paid and satisfied. Any objection to his testimony would only go to his credibility. And the further testimony that the defendant afterwards persuaded the witness to give him another note, is not incompetent within any rule that has been suggested. A witness may be heard to testify that he gave a party a note or other paper, in order that such party might make a fraudulent use of it; and if the fraudulent use to be made of it was to connect it with a previously satisfied mortgage, no rule of public policy seems to conflict with his stating that fact. It is no objection to the testimony of a witness that it goes to invalidate a title derived by deed from such witness. 5 N. H. Rep. 181, Hadduck vs. Wil-marth. The evidence in this case is not necessarily to defeat the deed by showing that it never had any legal existence, on account of fraud, but evidence to show that, having once become invalid, the party and witness combined together to attempt to make it available.

It has been said that a witness is not to be heard to allege his own turpitude ; but the common law does not recognize such a general rule in relation to witnesses. 3 Johns. Cas. 191.

Nor is John P. Marston incompetent, as against the defendant, to show that the note he gave the defendant was originally fraudulent. There is no suit here upon the note itself; and the defendant may, if he pleases, notwithstanding any decision to be made in this case, proceed for its recovery against the promiser. But in an action upon a negotiable promissory note, a party to it may in many cases be a witness to defeat the note, if not a party on the record, or interested. 2 N. H. Rep. 212, Bryant vs. Ritterbush; 5 N. H. Rep. 196, Carleton vs. Whitcher.

It has been said that a person who has put his name to a negotiable instrument cannot be a witness to show that it was originally void, even in a suit between the original parties to the instrument—that he cannot testify to facts which would render the note void even in the hands of a bona fide holder, for a valuable consideration, without notice, notwithstanding it has never passed into the hands of such holder. Vide authorities cited 1 N. H. Rep. 60, Houghton vs. Page; 5 Green. 374, Chandler vs. Norton. But we are all of opinion that this is not the true rule, and that if the exclusion is maintained in any case, it can only be so in a suit by an endorsee for value, without notice, and not in a case between the original parties to the note. 16 Mass. Rep. 121, Fox vs. Whitney. There is no reason why a party to a negotiable note, so long as it remains in the hands of the original payee, should not be permitted to give evidence of any illegality in the consideration, as gaming or usury, as well as want of consideration. There is no reason why a party who obtains a note by fraud, or upon an illegal consideration, should have greater protection than he who merely obtains it without any consideration. If it be true that after a negotiable instrument has passed into the hands of an innocent endorsee, a party who gave it currency by Ms signature should not be permitted to give evidence showing it originally void by reason of illegality, and thus defeating it to the prejudice of the innocent endorsee, it must also be true, if the evidence of a party to it is admissible in any case, that so long as the original payee holds it, the law should not exclude evidence to furnish him protection in his fraud. But that would be the effect of the rule, if a party to the note, might, while it was held by the payee, testify to facts which would not constitute a defence against an innocent endorsee, but not to any thing which would avoid it provided it had been, endorsed to an innocent holder. Whether the testimony of parties to a note or bill, who have no interest in the suit, may not be considered as competent in ail cases, may well be left to further consideration. Walton vs. Shelley, 1 D. Sf E. 296, which first established the exclusion in England, has been long overruled. Winton vs. Saidler, 3 Johns. Cas. 185, which was founded on Walton vs. Shelley, has shared the same fate. 5 Cowen 23, Stafford vs. Rice; ditto 153, Bank of Utica vs. Milliard; 3 Wendell 416, Williams vs. Walbridge. And Churchill vs. Suter, 4 Mass. Rep. 156, although not overruled, has been somewhat qualified in its operation by Fox vs. Whitney, 16 Mass. Rep. 121.

Upon the motion for a trial by jury, we are of the opinion that a defendant in chancery has a right, by the constitution, to have matters of fact, alleged in the bill and denied by the answer, tried by a jury, if they are material to the decision of the cause, and the application is seasonably made. Const, of N.H., Bill of Rights, Art. xx. At what stage of the proceedings the application must be made, in order to entitle the party to an issue, as a matter of right, we do not now determine. The issue in such cases is to be made up under the direction of the court, (7 Pick. 369) and sent to the common pleas for trial; and a question arises, what evidence is to be used on the trial there ? We are not aware of any rule which will require us to admit the parties to go into oral testimony before the jury, after the testimony has been taken for the case and published, and of course closed. It has always been the practice of the court to regulate the admission of testimony; and when the parties have rested, and have no further evidence which they then propose to offer, to make an order that the testimony shall be considered as closed, after which the parties have no right to insist upon the production of further evidence.

The manner of proceeding to the trial of issues from chancery is under the control of the court. Orders may be made respecting the admission of testimony, and an order may be made for the examination of one or both of the parties ; but this may be refused. Gresleifs Eq. Evid. 402, 404, cites 1 Jac. 516, DeTastet vs. Bordenare ; 2 Ves. Sen. 232, Clavering vs. Clavering ; 15 Ves. 176, Palmer vs.Lord Aylesbury; 1 Swanst. 166, 171, Gordon vs. Gordon; ditto 39, Rogerson vs. Withington; 1 Ves. & Bea. 374, Howard vs. Braithwaite.

If the party, after the evidence has been taken for the hearing, moves for a trial by the jury, we are of opinion the case should be tried there upon the same evidence on which it would have been tried had it taken the usual course of cases in chancery, and been examined by the court, unless the court upon cause shown make an order permitting further evidence to be introduced. Any other course would lead to great abuse, as one party might, (after the other had prepared all his evidence for a hearing, and the evidence was closed and published, as in this case) by insisting on a trial by jury, open the whole case again ; and not only produce additional witnesses, but thereby compel the adverse party to produce before the jury all the witnesses whose testimony he had already taken, in the proper course, to be used on the hearing.

The defendant’s counsel will therefore point out what facts he is desirous to try by the jury ; and the court, if the facts are controverted and material, will direct issues to be formed and sent to the common pleas, there to be tried upon the evidence taken to be used on the hearing in chancery.

The motion for an issue to the jury having been withdrawn, and the case submitted to the determination of the court, we have attentively examined the evidence which has been introduced.

The bill alleges, and the proof shows, that the defendant knew of the purchase by the plaintiff, and that he made no objection—that he knew the plaintiff was making repairs, &c., and said nothing about, his mortgage ¡ and it is suggested that the defendant for this reason ought to be precluded from setting up his mortgage. If the defendant’s claim had been under an absolute deed, there would have been great force in this position. 6 N. H. JR. 521, Morse vs. Child, But the claim of the defendant being under a mortgage merely, and that mortgage on record, there would be nothing fraudulent in the defendant’s standing by and seeing this done, unless he knew that the plaintiff was giving the full value of the land, and that the mortgagor was insolvent and could not pay, or something else was shown to make him a party to some deception in the matter. The plaintiff might well have made his purchase, and proceeded to repair, &c., with full knowledge that the defendant had an incumbrance, and relying upon the mortgagor to remove it, or with the intention of discharging it himself whenever it became necessary : and the defendant might innocently have acted as the attorney of the plaintiff in the management of the estate, under such a supposition. It is very different from the case of a claim under an absolute title, which would go entirely to defeat the right of the subsequent purchaser. But such silence on the part of a mortgagee might be fraudulent where he knew that the other party had no suspicion of his mortgage ; and it may well be weighed in this case in connexion with, and in support of, the other evidence.

It is not necessary to go into a particular statement of the evidence upon the main question of fact asserted in the bill and denied in the answer. It is sufficient to say that the testimony satisfactorily proves the material matters alleged in the bill. The mortgage appears to have been originally given to cover the property from the creditors of John P. Marston ; and the note, which it purported to secure, was not long after given up by the defendant. The application for its delivery, written by the wife of said John, at his request, and in answer to which the note was sent, is put into the case. It appears that after this, and about the time of the settlement of the suit commenced by John P. Marston against the plaintiff for the balance of the purchase money, the defendant procured from John P. Marston a new note, similar to the former one, and that he subsequently procured the first note, which the wife of said John had preserved, and destroyed it.

The defendant’s counsel objects, that the plaintiff is not entitled to the relief sought in this bill, because he has a plain, adequate and complete remedy at law. The plaintiff might perhaps have a remedy by the ordinary proceedings at law, which, would, eventually, be effectual to secure him in the possession of the estate in controversy. But it is not one adequate to the exigencies of a case of this character ; and it is well settled that a bill in equity may be maintained to set aside a fraudulent conveyance. I Story’s Eq. 118 ; 1 Sumner’s Rep. 505, Briggs vs. French; 8 N. H. Rep. 425, Dodge vs. Griswold.

But the counsel for the defendant further contends, that if the plaintiff is a bona fide purchaser, for a valuable consideration, without notice, it is not a ground for relief, though it is a good defence in equity. Such a principle has been applied in certain cases ; as where a mortgage for $3000 was registered as if for $300, and the plaintiff, who was a bona fide purchaser, without notice, filed his bill to be relieved against the mortgage beyond the sum expressed in the registry, and to stay the mortgagee from proceeding to sell. 18 Johns. 544, Beekmanvs. Frost, and auth. cited 3 Paige 432. It is founded upon the ground that the parties have equal equity, and that the court will not interfere. “ If,” says Mr. Chief Justice Spencer, “ the defendant has an equal claim to the protection of a court of equity to defend his possession, as the plaintiff has to the assistance of the court to assert his right, the court will not interfere on either side.” IS Johns. 562. And Mr. Justice Woodworth, in the same case, remarks —“ If the appellant” (who was the original defendant,) “ can at law prevail against the respondents, chancery will not disturb him, because both parties being innocent, and the equity equal, it will not interfere.”' Ditto 589. In the case before us, however, there is no pretence for the application of any such principle. If the defendant had a just debt, and he neither misrepresented about it, nor pursued a course calculated to deceive, his mortgage being registered, there could be no equity for the plaintiff. And, on the other hand, if the defendant, as it appears from the evidence, took the note and mortgage originally to cover the property—if he gave up the note afterwards, and had no note when the plaintiff took his deed, and therefore no color of title, and he made no suggestion of any title when he first knew the plaintiff had purchased, but has since procured a similar note, for the purpose of setting up the mortgage against the plaintiff, either for his own benefit, or that of any other person, he not only has no equity, but is guilty of a positive fraud. The rule would be the same if a debt originally valid had been released.

And this furnishes the answer to the next objection of the defendant, that the plaintiff, being a subsequent purchaser with notice, is not entitled to dispute the title of the defendant. The plaintiff is a purchaser with notice that a mortgage had been executed by his grantor to the defendant. No actual notice of the fact is shown, but the registry of the mortgage furnished constructive notice of the existence of the deed at the time it was recorded. This of course did not, and could not, prove that there was an existing incum-branee, when the plaintiff purchased. It was sufficient to put him upon enquiry, and to bind him if a valid mortgage did exist. 8 N. H. Rep. 264, Rogers vs. Jones. If he did not enquire, he is to be put in no better, nor any worse, situation than he would have been if he had. But if he had en-quired at the time, he must have been told that there was no debt existing—that in fact none had ever existed—that the note which was taken had been given up, and the mortgage thus extinguished. The debt being the principal, and the land the incident, there was then no pretence of an existing incumbrance. If it might ever have been valid, it was then no better than a satisfied mortgage ; and the record being only constructive notice of the facts as they existed, cannot now avail against the plaintiff, and preclude him from disputing a title set up under the mortgage by means of a new note, given for the purpose of defrauding him.

We are not required at this time to consider any question arising under the statute of the 27 Eiiz., or the law respecting voluntary conveyances. It may admit of doubt how far a registered voluntary conveyance is to be held void against a subsequent purchaser here. Vide 1 Story's Eq. 410, 411: 5 Peters. 280, Cathcart vs. Robinson. But the question now is, whether a party who has taken a note and mortgage,without consideration, and has afterwards delivered up the note upon which the mortgage was predicated, shall he permitted, after the mortgagor has sold and conveyed the land to a bona fide purchaser, to procure a new note, by collusion with the mortgagor, as a valid incumbrance, for the purpose of defrauding such purchaser.

The question needs only to be stated to make the answer apparent. The case shows a most palpable attempt at fraud, and a decree must be entered that the defendant release to the plaintiff all title and claim to the premises described in the mortgage.