Hubbard v. Savage

Daggett, J.

The question in this case, is, whether the note indorsed by Richard Hubbard for John S. Towner, on the 16th of June 1825, for 1000 dollars, is a lien on the mortgaged property, so that the decree to be passed shall embrace it This is understood, by the court and counsel, to be the only question. It may be otherwise thus stated: Is the mortgage deed of the 18th of May 1825, in point of law, a security for the payment of the note for 1000 dollars, indorsed on the 16th of June 1825, against a subsequent bona fide creditor with notice?

The fact of notice to the defendant Savage, in my judgment, may be laid out of the case; for if a lien was not created to the extent of the second note for 1000 dollars, by the deed, when made, it could not exist afterwards. If the deed was not valid to secure that note, it could not become valid against the defendant, by payment, nor by any knowledge which he might gain. The fact of notice of the indorsement and payment of the note might, indeed, shew, that no deception could have been practised on any creditor; but fraud or deception is not the ground relied on. The counsel for the defendant contend, that the deed is void as a security for the note for 1000 dollars, because R. Hubbard was not, when the deed was executed, bound to indorse it, and of course, could not be made liable for it.

If there was any foundation laid, by the facts found, to impute fraud to R. Hubbard in receiving this deed,—such as an agreement to lock up the property from creditors, and thereby secure it for the grantor, or to be subject to his disposition, the *219 court would look with attention to such facts as presenting evidence of fraud in fact. But nothing of that kind appears, or is even suggested.

The defence rests on this narrow ground, that the deed is void as it respects the note in question, because no debt was then due or liability incurred; and because to give effect to this deed would be to destroy our statute for the registry of all deeds of mortgage.

1. Is the deed void, because no debt was then due or liability incurred?

The deed was upon sufficient consideration, viz. the agreement mentioned in the condition to indorse upon request; and this could always be shewn, by his acceptance of it.

The consideration was not immoral, nor illegal, nor opposed to any principle of public policy.

I am unable to see, in the absence of all intention to deceive, how a deed given by a man indebted at the time, to secure against future liabilities, can be deemed void. If such be a principle of law, it is high time it should be known; for in the daily intercourse of men, such deeds are very extensively given and received, and entire confidence is reposed in them as valid securities. Such was the decision in Stoughton v. Pasco, 5 Conn. Rep. 442 . and in the more recent case of Crane v. Deming & al. 7 Conn. Rep. 387 . Such are all mortgages to secure bail, bondsmen for sheriffs, administrators, &c.

2. It is said, that the recording act would be defeated, by giving effect to this deed. It is true, that the decisions in Pettibone v. Griswold & al. 4 Conn. Rep. 158 ., in Stoughton v. Pasco, 5 Conn. Rep. 442 and in Shepard v. Shepard, 6 Conn. Rep. 38 . established the doctrine, that mortgages may be taken for “ existing debts, existing liabilities and perhaps for debts to be contracted in future.” Those debts and liabilities must be described with sufficient certainty to enable subsequent creditors or purchasers to ascertain, either from the condition of the deed or by enquiry aliunde, the extent of the incumbrance; or from its nature, as in cases where the mortgage is for indemnity, that there is a prior lien, which may not then be capable of ascertainment. These cases go no farther; nor can a more rigid doctrine be adopted, without subverting the fairest contracts.

I am aware, that there is a perhaps which precedes the class of liabilities “for debts to be contracted in future,” in the opin *220 ion of the Chief Justice, in Pettibone v. Griswold & al. 4 Conn. Rep. 161 . repeated in Stoughton v. Pasco, 5 Conn. Rep. 445 . But I think it may now be erased. In The United States v. Hooe & al. 3 Cranch, 73 . 89. Chief Justice Marshall says: “That the property stood bound for future advancements, is, in itself, unexceptionable, It may, indeed, be converted to improper purposes; but it is not positively inadmissible. It is frequent for a person, who expects to become more considerably indebted, to mortgage property to his creditors as a security for debts to be contracted, as well as for that which is already due. All the covenants to this deed appear to be fair, legitimate and consistent with common usage.” Hooe was known to be greatly indebted at the time of this conveyance.

In the case of Shirras & al. v. Caig & Mitchell, 7 Cranch, 34 . 50. the same learned judge says: “It is true, that the real transaction does not appear on the face of the mortgage. The deed purports to secure a debt of 30,000l. sterling, due to all the mortgagees. It was really intended to secure different sums, due at the time from particular mortgagees, advances afterwards to he made, and liabilities to he incurred to an uncertain amount. It is not denied, that a deed which misrepresents the transaction which 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 favour of a person, who has been in fact injured and deceived by the misrepresentation.” It is readily seen, how much stronger the case under consideration is in favour of the plaintiff than that was in favour of the grantee.

In The United States v. Sturges & al. 1 Paine's Rep. 525. it was holden, by the circuit court of the United States, Thompson, J. giving the opinion, where “a mortgage was given in reality to indemnify the mortgagee, but purporting to secure a sum of money payable in one year, and five years afterwards, it was assigned, the whole sum appearing from the instrument to be unpaid, that the circumstances of the case should have put the assignee upon an enquiry, from which he would have learnt the true consideration of the mortgage.” It was further *221 held, that “ although a mortgage be absolute upon the face of it, a court of equity will enquire into the real purpose for which it was given, and apply it to that use,”

The doctrine of these cases, decided where registering acts are in operation, applies, with great force, to the case under consideration. Here was no fraud:—no uncertainty. The object of the mortgage is plain, and unambiguous, and definite. In the cases from our own reports, the whole difficulty was the entire indefiniteness of the amount, for which the mortgage was made.

In Conrad v. The Atlantic Insurance Company of New-York, 1 Pet. Rep. 386 . 448. the supreme court of the United States adopt the same general doctrine.

I would, therefore, advise the superior court, that the note in question is a lien upon the mortgaged property, and to be embraced in the decree.

Hosmer, Ch. J. and Bissell, J. were of the same opinion. Peters, J. dissented. Williams, J. gave no opinion, having been of counsel in the cause.

Decree for plaintiff.