Murray & Co. v. Jones , 50 Ga. 109 ( 1873 )

McCay, Judge.

1. We are not prepared to say that the purchaser at the assignee’s sale cannot set up that the mortgage is fraudulent. True, there are cases that way: 34 New Hampshire, 102; 98 Massachusetts, 305; 32 Maine, 197. But there are cases contra: Williams vs. Varnneli, 4 Sand’s (N. Y.) Chancery, 388; Seaman vs. Slaughton, 3 Barbour Chan. R., 348; Dodge vs. Shelton, 6 Hill, 9.

On principle, it would seem that the right of the purchaser turns on whether the assignee has affirmed the sale or mortgage. "Without question, if he has done this, the purchaser would be estopped. The assignee may unquestionably affirm the fraud. That is, he may say “true the deed or mortgage is a fraud on the law, but if the vendee will pay the money to me I ayíII let the sale stand.” And the real question, in principle, would be, has the assignee done this in fact? Or has he done it in effect by so acting as to induce the purchaser at his sale to suppose that he has affirmed the sale or mortgage, by the bankrupt? We do not think this is done by the simple sale, under an order to sell subject to incumbranees generally. The deed, in 98 Massachusetts, definitely mentioned the specific mortgages, and the land was sold subject to them. Here is no specification. The order is to sell subject to incumbrances. What incumbrances? Any that anybody may have, legal or illegal, void or not void, fraudulent or not fraudulent? This seems to us absurd. The order of the register to sell subject to incumbrances must be taken to mean subject to legal incumbrances. It is not at all in the nature of a judgment that any particular incumbrance is a valid one, and, in our judgment, it is giving it a very improper scope to say so. The purchaser buys the title of the assignee. He is the agent of both the bankrupt and the creditors, and we think the purchaser buys all their rights. If they have intentionally and for a consideration, affirmed the mortgage, as a matter of course, they, having no further rights, the purchaser would get no rights to attack it. But it seems to us that a mere failure, perhaps because they did not know of the fraud, to attack it, is no affirmance.

2. But, we think the facts in this record show that Jones is an innocent purchaser. There is no proof that he is not, and his answer is positive. As to the fact, therefore, Ave think the Judge was bound so to think; nor is there constructive notice. Jones was no party to the proceedings in bankruptcy, nor was this mortgage in question there. The creditors might have attacked it, or Kyle might have proven his debt. It appears that he did not. At any rate, this land was sold before Jones purchased. Even the right to attack it in bankruptcy had passed away and been dismissed before Jones purchased. There was, at the time, no lis pendens involving the validity of the mortgage. That question had been turned over to the purchaser, so that Jones bought without notice, express or constructive. But it is said this mortgage, if in violation of the bankrupt law, is void for fraud. All fraudulent deeds and acts are void. But nothing is better settled than that this kind of fraud cannot be set up against an innocent purchaser, one who does not know of the fraud : Irwin’s Revised Code, 1942; 8 Georgia, 274, 7 Ibid., 534; Bond vs. Harrold, N. B. Register, vol. 7, page 100 ; Irwin’s Revised Code, 2743; 37 Georgia, 66. Nor is it true that the assignee of a mortgage is always open to the equities between the parties. This is true of all choses in action, except negotiable securities: Revised Code, section 2218. But under our law, “all bonds, specialties, or other contract in writing for the payment of money, or any article of property, are negotiable by indorsement or written assignment:" Revised Code, section 2734. True, a mortgage is not exactly “ for the payment of money ;” but it is not a title. In this State it is only a “security for a debt.” It is generally to the mortgagee and his assigns, and as this Court has held, more than once, the transfer of the note, with nothing more, passes the mortgage: 32 Georgia, 228, 9 Ibid, 86. But in this case there was a special assignment. We think, for these reasons, the Court was right in refusing the injunction.

Judgment affirmed.