Judges: Boardman, Landón, Learned
Filed Date: 5/15/1882
Status: Precedential
Modified Date: 11/12/2024
This is an action of foreclosure, against which the Weed Sewing Machine Company, a subsequent incumbrancer, alone defends. Simeon D. Wood is the mortgagor. The money which was loaned to him, $7,000, belonged to three persons, as follows, to Elizabeth B. Nichols $2,700, to Mary E. Ball $3,300, to George C. Nichols $1,000. And the bond given to the mortgagee, Charles F. Nichols,
The complaint alleges that the money payable on the bond was to be received by the plaintiff for the benefit of the persons above mentioned, as in the bond described.
The defense, set up by the Weed Sewing Machine Company, the subsequent incumbrancer by attachment and judgment against Wood, is two fold. First, that the mortgage was void, as intended to hinder, delay and defraud the creditors of George C. Nichols. Second, that it was void as against public policy, on the ground that it was made in an attempt to escape taxation.
First. As intended to hinder, delay and defraud creditors of George C. Nichols. It is very doubtful whether, on the facts, this bond and mortgage were made with such intent. So far as concerns the $6,000 belonging to Elizabeth B. Nichols and Mary E. Ball, the creditors of George C. Nichols had, and could have, no claim. And whatever these ladies did could not defraud, and could not be intended to defraud, his creditors. As to his $1,000, there were no suits against him; and he testified that he was then, and had ever since been, perfectly solvent. But if, to the extent of the $1,000, or even to the extent of the whole $7,000, this money be said to have been transferred to Charles F. Nichols with intent to hinder, delay or defraud creditors of George C., still
And here it may also be noticed that there has really been no attempt to transfer the ownership of the funds from George C. Nichols and the two others to Charles F. Nichols. No absolute ownership was given to him. He was but an express trustee for them. If there had been three bonds executed (one to each of the interested parties) and a mortgage to Charles F. Nichols as trustee, to secure these three bonds, then the case would have been like that of the ordinary railroad bonds, secured by a mortgage. No one would say that the purchaser of such a railroad bond had transferred his property; because the mortgage, which secured it, was executed to a trustee for all interested. The only .difference in the present case from that supposed is that one bond was given to the trustee for the benefit of the parties in interest. But they did not assign or transfer to Charles F. Nichols their property. They only put it in his hands as their respective trustee. They had equitably the same interest as before, and could have enforced their rights against Charles F. And a transfer in trust for the person making it is void only as against his creditors. (2 B. S., m. p. 135, § 1.)
Second. As to the claim that the mortgage is void as against public policy. The defendant cites the case of Cox v. Wightman (11 Sup. Ct., 4 Hun, 799). As that case is not reported in full, it may be well to state what was decided. One Beeve Dilley held a bond and mortgage executed to him. He assigned the bond and
But still there is a great difference even between the act of Eeeve Dilley in that case and the act of George 0. Nichols in the present. Dilley put his property out of his hands, so that he ceased to be, and testified that he had ceased to be, the owner. Nichols, in the most unfavorable view, did not put his property out of his hands, but only invested it in such a manner that it could not easily be found. If a resident of Broome county invests in a bond and mortgage on land in Saratoga county, with the intent, and in order, that the assessors of his town may not readily discover the mortgage, this is no culpable act. It is no act against public policy. If one, in order to escape taxation, sells his bonds and mortgages and invests in railroad stock, or in United States stock, or in railroad bonds, he does nothing wrong. If one with intent to escape taxation buys negotiable paper instead of lending on bond and mortgages, this fact does’not affect his title to the paper. And if he should bring
Assuming, for the purpose of argument, that George 0. Nichols put money into Charles F. Nichols’ hands to hold as express trustee for him, in order that the assessors might not discover it, we doubt whether Charles F. could refuse to perform that trust, on the ground of its illegality. But however that may be, if he should choose to perform the trust, no one could complain. And if this trustee invested the money in this bond and mortgage, it is not for the mortgagor to inquire what disposition the mortgagee may make of the money when collected. There.was - nothing illegal in the loan, even if the arrangement between Charles F. and George C. were against public policy. And the error of the defendant as we think, is in attempting to attach to the contract of loan between Wood and Charles F. an element of illegality, supposed to exist in the arrange ment between Charles F. and George 0. Nichols. Wood had no knowledge of any alleged illegality. The contract between Wood and Charles F. Nichols was to repay money which Wood had received, and that is what public policy requires.
There is still another consideration. The doctrine that, where there is an illegal contract, the law will not enforce it in favor of one party thereto against the other has never prevented either party from voluntarily performing the contract he has made. If, for instance, A. has transferred property to B. in order to defraud A.’s creditors and upon a promise by B. to return the property, A. cannot compel B. to keep his promise and return the property, if B. refuses. But, on the other hand, if B. does not refuse, but performs his promise and returns the property, A. can retain it and B. cannot reclaim it. Thus it appears that it rests with the party to the contract to perform or not. If B. should voluntarily return to A. the property thus illegally transferred, no one could complain. B. would be doing a lawful and proper act. He would be returning the property to its rightful owner. And his refusal to return is dishonest, although the law permits him to be dishonest, if he will. B.’s creditors would have no right to the property, because B. would only have performed a contract, which he might perform, if he
This may be illustrated by the case of Wood v. Erie Railway Company (72 N. Y., 196), where it is shown that a common carrier cannot set up as a defense that the shipper of goods is acting in violation of the statute relating to fictitious names.
The defendant cites Dewitt v. Brisbane (16 N. Y., 508). It is important to understand the facts of that case. Albert Brisbane executed a mortgage to James Brisbane, which, at the time of the assignment thereof by James, was a valid security to a certain amount. James assigned it to Viger, De Witt . & Co. as collateral security for an agreement of Albert, illegal under the statute. Albert conveyed to James the equity of redemption. James died; and the defendant was his son and his executor. Therefore it appears that the defendant represented not only the equity of redemption, but also the original mortgagee, who, as pledgor, had still an interest in the mortgage. The plaintiff, by his action, was not only attempting to foreclose the mortgage, but was necessarily attempting to foreclose the interest of James, as the mortgagee, inasmuch as the assignment was not absolute, but only as security.
Thus the question was not purely whether the mortgagor could defend on the ground that the assignment was made for an illegal purpose. The further question was involved whether the assignor of the mortgage, where the assignment was collateral to an illegal purpose, might not resist the foreclosure of his interest therein. The case of Johnson v. Bush (3 Barb. Ch., 207) decided that the assignor, a corporation, had no power to assign, as it did; that is,
We have examined the case of Drexell v. Tyrrell (15 Nev., 114), cited by defendant. As the case is not authoritative in this State, it is sufficient to say that we have considered the opinion of the majority of the court arid the cases cited to sustain it; and we do not think it correct, or sustained by the citations. As we think, the opinion fails to appreciate that there is no illegality in the contract of loan; and that the question is only whether one who has borrowed money shall repay it.
The judgment is affirmed, with costs.
Judgment affirmed, with costs.