Lewis v. Dudley

The plaintiff seeks to set aside the mortgage given by Nellie M. Dudley to Rowell on the ground that it was fraudulent as to the creditors of her husband, George F. Dudley. The plaintiff claims that the purchase of the mortgaged property by George F. in the name of his wife, upon the understanding that it should be held in trust for him, was made for the purpose of placing the property beyond the reach of his creditors, or that the transaction constituted a secret trust, and in either case was fraudulent and void as to his creditors; and that Rowell was chargeable with notice of the circumstances constituting the fraud. Conceding that the original transaction between George F. and his wife was fraudulent, and that her title was void as to his creditors, yet she acquired a title which she could transmit to an innocent purchaser. Her title was not void; it was merely voidable. Although it was liable to be impeached by the creditors of her husband, yet that right cannot be exercised against one who, without notice of the fraud, in good faith and for a valuable consideration, purchased the property from the fraudulent vendee. Comey v. Pickering,63 N.H. 126; Ashland Savings Bank v. Mead, 63 N.H. 435.

The validity of the plaintiff's title, therefore, depends upon whether Rowell was an innocent purchaser. The finding that the mortgage was made in good faith, to secure a contemporaneous loan, and without any fraudulent intent, shows that he was a bona fide purchaser for value. Whether the circumstances attending the transaction were such as should have put Rowell on inquiry and charged him with notice of the fraudulent title of his grantor, are questions of fact. Janvrin v. Janvrin,60 N.H. 169, 172, 173; Preston v. Cutter, 64 N.H. 461, 468, 469; McNally v. Bailey, 65 N.H. 208; Martin v. Livingston, 68 N.H. 562, 563. The finding of fact that the transaction was entered into in good faith, with no intent to defraud creditors, is a finding that Rowell had neither actual nor constructive notice of any defect in his grantor's title. As this finding was made upon competent and sufficient evidence, it is conclusive here.

It appears that Rowell was chargeable with notice of the circumstances by which a trust in the property resulted in favor of the husband; but it does not appear that Rowell knew of any intent on the part of George F. to defraud his creditors by means of this transaction, nor was it shown that Rowell knew of George F.'s indebtedness, either at the time of the purchase of the property or when the mortgage was given. In the absence of knowledge on Rowell's part of any intent by George F. to defraud his creditors, or of any circumstances from which such intent could be inferred, Rowell is not chargeable with notice of any fraud. He is an innocent purchaser for value, and took a good title under his mortgage, although his grantor's title may have been fraudulent.

The mortgaged property was owned by George F. Although the title was in his wife, yet she held it in trust for him. The mortgage was given by her with the knowledge and approval of the husband, so that he was estopped from claiming adversely to it. Rowell understood this, and would not have made the loan without George F.'s assent. If the transaction is regarded in legal effect the same as though the loan had been made to George F., and he had directly given the mortgage, still it must be upheld. No reason is suggested or appears why Rowell could not obtain a valid mortgage of this property from George F. to secure a present loan made in good faith and with no knowledge on Rowell's part that there were any creditors.

Decree for the defendant Rowell.

CHASE, J., did not sit: the others concurred.