87 Ala. 736 | Ala. | 1888
Lead Opinion
The present bill is filed by the executors of James McDonnell, deceased, to set aside as fraudulent a deed of trust executed by Peter Burke on June 15th, 1885, to "W. J. Hearin, as trustee for the Mobile Savings Bank, to secure a promissory note made by Burke and wife, of even date with the conveyance, for the sum of fourteen thousand dollars, and payable thirty days after date. This conveyance was a renewal of a series of prior mortgages on the same property, the first of which was executed on September 30th, 1884, to secare a debt of fifteen thousand dollars due by Burke to the Bank; and the others, four in number, being executed at various dates afterwards, extending to, and including the one in controversy. These conveyances were withheld from the record, none of them being registered except the last; and this was recorded on July 27th, 1887, on the day after Burke made a general assignment of his property to his creditors.
The question which we first consider is the admissibility of that portion of Burke’s testimony which relates to the execution of the mortgage, and the alleged agreement between himself and the Bank that the instrument was to be withheld from the record, and-its existence kept a secret, for the purpose of enabling Burke to maintain his credit with the public. Burke is a party defendant to the record in this case, and was introduced as a witness by the complainants, not by the Mobile Savings Bank, itself also a defendant to the suit. The transaction as to which he testified occurred between him and one MqMillan, now deceased, who was then acting as cashier of the Bank, a relation of agency which was unquestionably of a fiduciary character.
We repeat, by way of lending emphasis to the fact, that, as to the class of statutory exceptions, the common-law rule is preserved, and not abrogated, and that rule generally makes parties to the record incompetent. That this case falls among those excepted by the statute, scarcely admits of argument. The proposed wdtness, Burke, is a party to the record. Whether he is otherwise interested, makes no sort of- difference.- McMillan, the agent of the bank, with whom the transaction occurred, is deceased, and was so at the time of the trial. We hate often said, that the purpose and policy of the statutes are, to exclude the living from testifying against the dead, because the latter can not be heard in contradiction. A contrary rule would open broad the door to the entry of innumerable frauds. That a party to a suit is, under the statute, incompetent to testify as to a transaction
The concluding clause of the statute — '“unless called to testify thereto by the opposite party” — is only declaratory of the common-law rule, which permitted the immunity of incompetency to be waived by the opposite party, — by which is meant the party to the transaction whose rights would be affected by the testimony offered.—Dudley v. Steele, 71 Ala. 423.
In this view of the law, it is immaterial that the interest of Burke was equally balanced; his exclusion as a witness not resting on the ground of interest merely, but upon the independent fact of his being a party to the suit and record.
It next becomes our duty to consider this case disembarrassed of so much of Burke’s testimony as may be construed to have reference to any transaction or conversation between himself and McMillan, pertinent to the mortgage in controversy, or any other collateral facts in issue. Burke being the only witness who testifies to any positive or express agreement between the parties to withhold the mortgage from registration, and to conceal its existence, we are left to make only such inferences on this subject as may be justified by the other evidence in the case.
The theory upon which the complainants’ ease must rest, then, is this: That Burke, at the time he executed the mortgage, was insolvent, and this fact was known to the Bank; that he was, however, reputed to be solvent and financially prosperous; and that the Bank fraudulently withheld the mortgage from the record, and permitted the mortgagor to remain in possession of the mortgaged property — a storehouse in which he was carrying on the mercantile business— for the specific purpose of giving him a fictitious credit; that the complainants’- testator and others, being' misled by the deceit, indorsed for, and loaned money to Burke, on the faith of the belief that no such mortgage existed, and thereby lost large sums of money, which they would not otherwise have lost.
It is manifest that the bill can be maintained only by proof of actual or positive fraud, either in the execution of the mortgage, or in the use made of it after its delivery to the Bank as grantee. Our statutes of registration go no further
Nor is it pretended that the Bank, or any of its agents, ever made any positive representations touching the solvency or credit of Burke, which could have come to the ears of McDonnell, so as to have influenced him in making loans to, or indorsements for Burke. Even were this true, such a representation, even though false, would not constitute a basis of an action for damages, unless it was either “in writing signed by the party sought to be charged,” or else made with the intent to defraud, which would involve the false affirmation of some alleged fact that the party making knows to be false, or of the truth of which he has no knowledge, or well grounded belief.—Clark v. Dunham Lumber Co., 86 Ala. 220; 5 So. Rep. 560; Code, 1886, § 1734. Nothing can be found in this principle which can lend plausibility to the contention of the appellees.
We can discover nothing in the facts of this case which justified the conclusion, that there was any fraudulent intent on the part of the Mobile Savings Bank in originally taking the security. No question is raised as to the alleged bonafides of the debt which it was given to secure; and the conveyance embraced less than a third of the assessed value of the mortgagor’s unincumbered property. If the instrument had been recorded at once, there would scarcely have been any available pretext upon which its validity could have been successfully assailed. Especially is this apparent in view of the fact, that the settlement between Burke and the Bank, on September 30th, 1884, of which the first of the series of mortgages constituted a part, operated to release McDonnell from certain debts to the Bank, which he had incurred as indorser for Burke, of over fifteen thousand dollars — or a sum greater than that of the mortgage debt. We can not suppose this release would have taken place, in this substitution of securities, unless the mortgage had been given. It enured, therefore, indirectly to McDonnell’s benefit, as fully as it would have done had he been the beneficiary in the instrument. Whoever may have ground to complain of being
This leaves but one ground upon which to maintain the bill, and that is the failure or refusal of the Bank to record the mortgage, and the alleged fraudulent motive with which this was done. There may, no doubt, be cases where a deed, or mortgage, not at first fraudulent in its inception, may become so by being actively concealed, or not pursued, “by which means creditors,” as said in an old English case, “are drawn in to lend their money.”—Hungerford v. Earle, 2 Vern. 261; Hildreth v. Sands, 2 John Ch. (N. Y.) 35. We are not dealing with the case of a deed, where the vendor is left in possession, contrary to the essential nature and terms of the conveyance, but with a mortgage, where continued possession by the mortgagor, for a length of time not unreasonably long, is consistent with the nature of the security. In such a case, a fortiori, to make the withholding of the instrument from the record fraudulent, especially as to debts afterwards created, it must have been done with the purpose of upholding fictitiously the credit of the mortgagor, so as to enable him to obtain money or goods of others, which he would not be likely to do if the instrument were recorded. In other words, there must be an actual intent to defraud, resulting in damage to some creditor of the grantor.—Tryon v. Flournoy, 80 Ala. 321; Danner Land & Lumber Co. v. Stonewall Ins. Co., 77 Ala. 184; Blennerhasset v. Sherman, 105 U. S. 100.
It is not certain that the Bank, through its officers, was any better informed as to the solvency of Burke than McDonnell himself was. His credit seems at one time to have been excellent with both of them. At the time of Burke’s suspension, he owed the Bank between seventy-five and eighty thousand dollars, and he owed McDonnell, contingently, between fifty-five and sixty thousand dollars, which soon afterwards actually accrued from this liability for previous loans and indorsements, and was proved by McDonnell as a claim against the trustee under Burke’s assignment. Deducting the mortgage debt in question, this would leave but a few thousand dollars of difference between the credits thus extended by the two parties. In this estimate, we do not, of course, consider Burke’s debt which he at one time owed the bank, and which was secured by pledge of Alabama State bonds. It is made to appear that McDonnell and
We fully recognize the doctrine of the well-considered case of Blennerhassett v. Sherman, 105 U. S. 100, where the authorities bearing on the subject of the fraudulent withholding of mortgages from registration are ably reviewed. There, an insolvent debtor had executed a mortgage upon his entire estate, for a very large sum of money. The secured creditor not only knew of the debtor’s insolvency, but actively concealed the mortgage by purposely withholding it from the record, and in the meanwhile represented the mortgage debtor as having a large estate and unlimited credit— all this being done for the fraudulent purpose of giving him a fictitious credit — and by this means he was enabled to contract other debts which he could not pay. This fraudulent intent was properly held to vitiate the mortgage as a valid security, and to render it void. The case of Hilliard v. Cagle, 46 Miss. 309, seems to go to the extent of creating an estoppel in favor of creditors generally, without any actual fraud being imputed to the mortgagee in withholding his mortgage from registration. This view is contrary to the spirit of our registration statutes, and does not seem to us to be based on sound reasoning. It affords protection to those not intended to be protected by the statute — -to other than subsequent purchasers for value, mortgagees and judgment creditors.
After a careful examination of all the legal testimony in this case, we do not feel authorized to find that the mortgage in controversy, covering less than a third of the assessed value of the debtor’s property, and perhaps not more than a fourth of its real value, was either fraudulent in its execution, or was withheld from record for the fraudulent purpose imputed by the bill to the mortgagee.
The chancellor erred, in our judgment, in so deciding, and his decree must be reversed. A decree will be rendered in this court, adjudging the complainants not to be entitled to the relief prayed, and dismissing the bill.
Beversed and rendered,
Rehearing
We have given very careful attention to the application for rehearing in this case, and are constrained, after due consideration, to overrule it. Tbis we have done after an attentive examination of all the authorities cited on the briefs of counsel, and many others besides.’
The main point of contention is the admissibility of Burke’s testimony. We held that, being a party defendant to the record — an indispensable party — he could not, therefore, testify to any transaction which occurred between him and McMillan, the deceased agent of his co-defendant, the Mobile Savings Bank, because he was prohibited from doing so by section 2765 of the Code (1886).
It is now urged that, inasmuch as a decree pro confesso was taken against Burke, this rendered him a competent witness to impeach for fraud the validity of the mortgage which he had executed to the Bank. The argument is, that this rendered him competent under the rules of the common law, and of equity practice, and, therefore, he is competent under the present statute, although he might be properly excluded if no decree pro confesso had been rendered. The point presented is one worthy of attentive examination, and has been argued by counsel on both sides with research, candor and ability.
We stated the rule of the common law to be, like that of the Roman law, that a party to the record was generally held incompetent to testify in a cause, by reason of the mere fact of his connection with the record, and irrespective of the question of his interest in the result of the suit. This rule, as Mr. Starkie observes, is not founded merely on the consideration of pecuniary interest, but, in part at least, “on principles of policy for the prevention of perjury.” 3 Stark. Ev. *1061. Mr. Greenleaf adopts this as the better opinion, as the contrary principle would hold out to parties a strong temptation to perjury; and, therefore, he says, “the party is not admissible, without the consent of all the parties to the record, for the privilege is mutual, and not several.”- — 1 Greenl. Ev. §§ 354, 329. The same view is supported by Mr. Stephen in his work on Evidence (Stephen’s Dig. Ev., Art. 107); although the view of Mr. Best is, that
In this case, it is very important not only to ascertain the true rule in this respect, but the reason on which it is founded. The Supreme Court of the United States has many times had occasion to discuss the question, and is committed to the broad view, that (irrespective of statute) the party to a record, although divested of all interest, is disqualified to testify in the cause, if his testimony be objected to by any other party to the record. In Stein v. Bowman, 13 Pet. 209, an action at law, it was said the opposite rule “would hold out to parties a strong temptation to perjury, and we think it is not sustained either by principle or authority.” “It would,” said Mr. Justice McLean, “lead to perjuries, and the most injurious consequences in the administration of justice.” “The exclusion,” says Mr. Justice Nelson, in Bridges v. Armour, 5 How. 91, “is placed on the ground of public policy, which forbids a party from being a witness in his own cause,” • • • ‘the opposite rule “holding out to litigants temptations to perjury, and to the manufacturing of witnesses in the administration of justice.” That court has thus alway adhered with great strictness to “the common-law rule, that a party to the record can not be a witness, either for himself or a co-suitor in the cause,” until its abrogation by statute in the year 1864. — United States v. Clark, 96 U. S. 37, 44. There are many other courts that have taken the same view of this general rule of the common law, which is, of course, subject to many exceptions, based on necessity and convenience. It has, for example, been held that a party may testify to collateral facts in a suit; as, facts authorizing a continuance; the service of notice to produce papers; search for lost papers, and, perhaps, the fact of loss itself, with a view of introducing secondary evidence; or to the contents of a lost trunk or package, and other like cases.
It is especially insisted that another exception to the rule is, that a party defendant, against whom a judgment by default, or decree pro confesso has been rendered, is competent, on the ground that he ceases to be a party to the record. It is sought to sustain the admissibility of Burke’s testimony on this ground — the record showing a decree pro confesso against him.
The only ground on which the principle contended for can be logically sustained very clearly must be, that a judgment by default, or decree pro confesso, like a nolle prosequi, or separate verdict, terminates the suit as to such defaulting defendant, so that he ceases to be a party to the record; or else, that this ends his interest in the litigation, and that a party defendant, who has no interest, may testify against the protest of other parties who are prejudiced by his testimony.- — 1 Greenl. Ev. § 355.
There are several early cases in this State, prior to the Code of 1852, in which mere nominal parties to the record, without any interest in the event of the suit, were allowed to testify; and others where they were admitted to testify against their interest, when called by the opposite party. Prewitt v. Marsh, 1 S. & P. 17 (1831); Duffee v. Pennington, 1 Ala. 506 (1840); Cunningham v. Carpenter, 10 Ala. 109 (1846); Burns v. Taylor, 23 Ala. 255 (1853). So, in Scott v. Jones, 4 Ala. 695, a defendant in an action of assumpsit, against whom a judgment by default had been rendered, was held to be competent to prove the other defendants were his partners; and this ruling was followed in Gooden v. Morrow, 8 Ala. 486.
The rule in chancery cases, too, we admit, was, perhaps,
It is admitted that these decisions apparently go very far to sustain the contention of the appellant’s counsel. Their force is weakened, however, as we shall seek to show, by the obvious fact, that they are opposed to the policy of our present statute, which seeks to avoid the strong temptations to perjury which might flow from allowing the living to testify against the dead. They ignore, moreover, that reason of the common-law rule, to which we have adverted, which was adverse to admitting parties to testify, on the ground, not of interest merely-, but of that bias and prejudice begotten of forensic contention, which is often more potent than pecuniary interest. This polifey was founded on man’s inherent love of triumph, and his correlative aversion to defeat in all things, however profitless the result in pecuniary gain. This principle was well illustrated in the barbarous practice of wager by battle, which was once a common mode of settling lawsuits, criminal and civil, and was nothing more nor less than a duel to the death between ferocious litigants to settle a litigated lawsuit.
The policy of these decisions, we may further observe, was reprobated by the Code of 1852 (§ 2302), which re
There is no occasion, in this view of the case, to declare these decisions overruled, although they are opposed by strong authority. For example, it is held in Swanzy v. Parker, 50 Penn. St. 441; 88 Amer. Dec. 549, where the cases are reviewed, that a defaulted defendant, although without interest in the suit, is incompetent to testify, because he is still a party to the record; and Wolf v. Fink, 1 Penn. St. 435, is an authority to the same point. So, in DeWolf v. Johnson, 10 Wheat. 368, a defendant against whom a decree pro confesso had been taken was held by the United States Supreme Court to be incompetent as a witness, and was excluded because he was still a party to the record. The latter is just this case.
It will be found generally true, that where contrary rulings have been made, and the reasons given, defaulted parties have been admitted on the alleged ground that they have ceased to have an interest in the- suit, not on the ground that they had ceased to be parties; as in Lupton v. Lupton, 2 John. Ch. 614, a case in equity, and Worrall v. Jones, 7 Bing. 395, which was an action at law.
Under our present practice and existing statutes, unlike what they formerly were, shortly prior to the Code of 1852, it is very certain that a decree 'pro eonfesso does not now operate to discharge a defendant as a party to the record, or sever his connection with the cause, The most to be ac
If we should even regard this question under discussion as a doubtful one under the old law — one on which the authorities everywhere have been at variance — the history and phraseology of our legislation show that the policy of our present statute, as embraced in section 2765 of the Code of 1886, was to prohibit parties from testifying as to certain transactions with deceased persons, within the specified exceptions, because of the injustice done the opposite party by reason of want of mutuality — his equal footing being destroyed by the death of his witness, with whom the alleged transaction or conversation occurred. It was observed in Kumpe v. Coons, 63 Ala. 448, that this statute “was intended as a revision of the whole subject of the competency of witnesses because of interest, or because of their relation to the suit or proceedings, and to substitute the rule prescribed by them, not only for the rules of the common law, but for the provisions of former statutes.” In Dudley v. Steele, 71 Ala. 423, it was said that the statute, as now existing in section 2765 of the Code, enlarged the former common-law rule of competency, but “preserved the common-law rule as to the class of excepted cases.” This clearly means those exceptional cases in which parties, or interested persons, were allowed to testify at common law, which do not violate the policy, or contravene the plain purpose of the statute as it now exists; as where one party to the record was called to testify in favor of the opposite party, against his own interest, which was the very case of Dudley v. Steele, supra. The case of Dismukes v. Tolson, 67 Ala. 386, is another illustration of our proposition. We there ruled, that original entries made by a defendant in his own shop-books, although admissible ordinarily in his own favor under certain restrictions, as an exception to the common-law rule excluding parties, could not be proved by himself, in a suit brought by the administrator of a deceased person, where such entries had reference to a transaction with the deceased in his lifetime. Such evidence was held to violate the policy of the
To reiterate: parties to the record were incompetent witnesses at common law, except in certain cases. The statutes of this State now make parties competent to testify, except in a particular class of cases — i. e., genericallv, where the transaction testified to was with a deceased person. We deduce the rule, that the common-law exceptions, whereby parties were held competent in certain cases, will not now be engrafted on the present statute, where such exceptions are repugnant to the obvious policy of such statute. Only such of these common-law exceptions as do not contravene the purposes of the present statute, will be recognized as now being in force. The present case, in our judgment, is not one of them.
Our conclusion is, that Burke remained a party to the record, notwithstanding the decree pro conjesso against him; and being a necessary, and not a nominal party, he ought not to be allowed to testify, as to any transaction with a deceased agent of his co-defendant, the Savings Bank, unless called to testify thereto by such party, whose rights would be injuriously affected by his testimony.
The other objections to the opinion and judgment heretofore rendered in the cause will be overruled.
The application for rehearing is refused.
