Lawson v. Alabama Warehouse Co. , 80 Ala. 341 ( 1885 )

SOMERVILLE, J.

We concur in the conclusion reached by the chancellor, in so far as he holds that the testimony fails to show satisfactorily that the mortgage in controversy, which was executed by Jones to Lawson, on the 11th day of October, 1873, was made with any intention to hinder, delay or defraud the creditors of the grantor, or, if it was, that this fraudulent intent was participated in by the grantee. It is needless that we should attempt any review of the testimony bearing on this point.

But we can not concur in the other view expressed in the chancellor’s opinion, in which he construes the conveyance to be one containing a secret trust for the benefit of the grantor. This conclusion is based solely upon the fact that there is a false recital of the consideration of the mortgage, or of the amount intended to be secured. The amount of indebtedness is stated to be five thousand dollars, due and payable on the 11th day of December, 1874. It is shown, in truth and in fact, to be only the sum of two thousand eight hundred dollars actually loaned at and before the date of the mortgage, and of two thousand two hundred dollars agreed to be loaned or advanced, at times and in amounts to suit the mortgagee’s convenience.

The case is clearly not one of a simulated consideration, where the debt secured is intentionally recited to be larger than it really is. If this were so, the conveyance would be void for fraud, as in Hall v. Heydon, 41 Ala. 242. The rule is settled to be that false recitals of indebtedness in a mortgage, by exaggeration of the amount, are only prima facie evidence of fraud, and this presumption may be rebutted by showing fairness of intention on the part of the mortgagee. In other words, it is a mere badge of fraud, susceptible of explanation. This was decided in Stover v. Herrington, 7 Ala. 142, and the principle is elsewhere so recognized. This case was based on the decision of Chief-Justice Marshall, in Shirras v. Craig, 7 Cranch, 34, where the mortgage purported on its face to secure a debt of £30,000 sterling due to all the mortgagees. It was really intended to secure different sums due at the time to particular mortgagees, advances afterwards to be made, and liabilities to an uncertain amount. The court said: “It is not to be denied that a deed which misrepresents the transaction it recites, and the consideration on which it is executed, is liable to suspicion. It must sustain a rigorous examination. It is certainly always advisable fairly and plainly to state the truth. But if upon investigation the real transaction shall appear to be fair, though somewhat variant from that which is described, it would seem to be unjust and unprecedented to deprive the person claiming under the deed, of his real equitable rights, unless it be in favor of a person who has been in fact injured and deceived by the misrepresentation.” In Summers v. Roos & Co., 42 Miss. 749; s. c. 2 Amer. Rep. 653, the objection was urged, as here, that the mortgage on its face purported to secure advances already made, while in fact it was really intended to secure future advances as well as advances already made. The authorities are cited and reviewed showing the objection to be unavailing in every sound point of view. The present case, in our opinion, seems scarcely to be distinguishable from Lovelace v. Webb, 62 Ala. 271. There the mortgage recited, as one of the debts secured, the sum of three hundred dollars advanced on the day of the execution of the instrument, to enable the mortgagor to make a crop. The proof showed that the sum was not then advanced, but there was merely a verbal agreement that it should be advanced, as it ultimately was during the year. This was held to be sufficient constructive notice of the prior right, duty and liability of the mortgagees, and the validity of the instrument was accordingly sustained, the consideration proved being equally valuable and valid with the one recited. As said in Collier & Son v. Faulk et al., 69 Ala., 58, “all that can be required is, that a mortgage designed to secure such future liabilities should desci’ibe the nature and amount of them with reasonable certainty, so that they may be ascertained by the exercise of ordinary diligence on proper inquiry.” The recital of the specific sum as already due was certainly sufficient to put subsequent purchasers or incumbrancers on inquiry. 1 Jones on Mort. |§ 364-367; Driver v. McLaughlin, 20 Amer. Dec. 661, note.

There is nothing in this case which brings it within any principle laid down in Sims v. Gaines, 64 Ala. 392.

The chancellor erred in holding the mortgage in question to be void for fraud, and his decree is for this reason reversed, and the cause will be remanded.

Clopton, J., not sitting.