Simmons v. Johnson

The referee’s finding that the transaction of foreclosing the Briggs mortgage, resulting in the purchase by the mortgagee and conveyance to the wife of the judgment debtor, was had with the intent to hinder, delay and defraud 'the plaintiff’s intestate as creditor, is challenged by the defendants’ counsel who contends that it is not supported by evidence. The validity of the mortgage is not questioned, nor is the regularity of the proceedings in the action to foreclose the mortgage or .in those of the sale pursuant to the judgment. We think the evidence warranted the conclusion of the referee that the purpose on the part of the defendant John Johnson was to defeat the collection from him of the debt, which afterwards went into the judgment recovered by Simmons against him, after a litigation of three and a half years ; and that it was by his procimement and with that view that the action to foreclose the mortgage was instituted and the subsequent proceedings had which resulted in the conveyance to his wife. And the circumstances permitted the inference that the parties to such conveyance were chargeable with notice of such intent on his part, and did what was done by them in aid of his purposes in that respect. The apparent effect of such action and proceedings was to divest Johnson of his interest as mortgagor which was of the value of $3,000, and vest the title in his wife, and the substitution of her mortgage for his upon the same property for the debt due Mrs. Briggs, and without any personal responsibility other than that furnished by the title to the property taken by her mortgagor. It is true that Mrs. Briggs, as mortgagee, had the undoubted right to proceed to foreclose her mortgage, to become the purchaser at the sale, and thereupon to make such disposition as she pleased of the property; and from *134snob proceedings so founded upon her right to take them, the presumption would go in support of her title in that manner obtained. But the fact that the mortgage was valid and the proceedings regular do not preclude evidence and inferences legitimately derivable from it of a purpose tainted with fraud as against the creditors of the mortgagor, else the form of judicial proceeding might become an effectual shield as against third persons who are in no situation- to become parties defendant in actions so brought, although those made defendants as in this instance permit judgment by default, and through its result, or in the proceedings founded upon it, surrender whatever interests they have, however valuable they may be, and thus deny to their creditors the means of any available remedy for the satisfaction of their claims out of the property rights so relinquished. 'While the judgment may be conclusive upon the parties to the action in which it is rendered, the consequence is not so to third parties under such circumstances. (Humes v. Scruggs, 94 U. S., 22; Lewis v. Rogers, 16 Penn. St., 18; Clark v. Douglass, 62 id., 408; Whittlesey v. Delaney, 73 N. Y., 571.)

The judgment in the foreclosure action was no other than such as the mortgagee was entitled to. The creditor was not prejudiced by that, otherwise than by the means it furnished to extinguish the junior mortgage lien of the debtor on the property, which was accomplished by the execution of the judgment. The motive of a party in the prosecution of an action, to obtain that to which he is rightfully entitled, is not ordinarily the subject of attack by third parties. And the purpose in such case becomes a matter of criticism only when it involves the consideration of the means employed to accomplish the result, and when those means are not consistent with a purpose honest or fair towards others who may have some interest to protect. The complaint of the plaintiff here is that the mortgagor was permitted, by the mortgagee to use the process of the court and to cause the execution of its judgment in the name of the former for his benefit, and to accomplish the purpose of defrauding the plaintiff’s intestate, his creditor. And the circumstances justify that inference. The mortgagee realized nothing from the execution of her judgment other than another mortgage for the amount of her debt, although the property had a value nearly three times that sum. . The mortgagor permitted his lien to be extinguished by the *135sale to bis sister of tbe property for tbe amount of ber debt, and sbe conveyed to the plaintiff’s wife tbe property for a like consideration secured wholly by tbe mortgage of tbe latter. And while she has tbe title it is difficult to see that be is not beneficially interested in tbe use and enjoyment of tbe farm, as it apparently still remains under bis management, although be assumes tbe relation of agency to bis wife.

"While a married woman may purchase and hold property as well as any other person, and exclude tbe husband from any control or beneficial enjoyment of it, that relation is not necessarily excluded from consideration when tbe circumstances fairly give bearing to it upon tbe question of bis intent, in enabbng ber to take title and absorb bis interest in it. There is evidence to the effect that having made a contract with a person to build a bouse on tbe premises, Johnson said to him after tbe timber bad been procured for it, that “ be was going to have tbe farm sold and wanted to get things in shape so that Simmons wouldn’t get bold of it,” and did not then want him to commence tbe work, and that after tbe sale be was directed by Johnson to proceed with it. This may have been treated by tbe referee as a circumstance of some significance, and there are others appearing in tbe evidence which may have been treated as bearing in hke direction, amongst which was tbe fact that be received from tbe mortgagee tbe mortgage and took it to an attorney, who thereupon instituted and conducted tbe action and proceedings of foreclosure and sale. The sale was bad at a village remote from tbe county seat. It was attended by tbe mortgagor, who was apparently content to have tbe purchase made by tbe mortgagee for tbe amount of ber debt, including tbe costs and expenses of the action and of tbe execution of tbe judgment. Tbe intent to defraud is not usually declared openly and directly, and can be established only by evidence of facts, which tend to characterize tbe motive of tbe parties charged with such intent. There are here a combination of circumstances which tbe referee, being as be was upon tbe evidence permitted to adopt as true, was enabled to conclude were in harmony only with tbe purpose of Johnson to place tbe property where it might be held for tbe benefit of bis family and to prevent tbe collection of tbe judgment if one should be recovered by Simmons in tbe then pending action against him.

*136The defendant, Johnson, had no title .to the property at any time after that debt was. contracted. And as the plaintiff’s judgment never was, and could not become, a lien upon the land the judgment creditor was in no situation to move for a resale of it upon the foreclosure judgment. His remedy was solely by an independent action. And the property which he seeks to reach is what was the interest of his debtor as mortgagee, and assuming that he was a mortgagee in possession, having the rights incident to that relation, he could defend his possession against the title of his mortgagor until the debt secured by his mortgage was satisfied. This right was in some sense an estate in the land. (Phyfe v. Riley, 15 Wend., 248; Miner v. Beekman, 50 N. Y., 337; Hubbell v. Sibley, id., 368, 372.) And whatever rights Johnson had as mortgagee were surrendered by means of the proceeding adopted and taken for the purpose of defrauding his creditor, resulting in the conveyance to his wife, who by it took the benefit of such surrendered interest of her husband, and it was equal in amount to the excess in value of the farm over the consideration of the conveyance to her which she secured by her mortgage to Mrs. Briggs. This claim of Johnson, as mortgagee, treated merely as a lien upon the land, having in the manner before mentioned been swallowed up in the title taken by Mrs. Johnson, she may to the extent of such excess and for the purposes of the plaintiff’s remedy, be treated as trustee for the creditor. And in that view we see no reason why the relief given by the referee, and as directed by the judgment, may not be supported, although the debtor may have had no estate in the land or interest affecting it, other than the lien furnished by the mortgage held by him. It is however contended by the learned counsel for the defendants, that as the plaintiff counted upon the alleged fact of title in Johnson, up to the 'time of his conveyance to Wales, and did not allege or found by his complaint any claim upon his right or interest as mortgagee, the action upon the proofs and findings of the referee cannot be supported. But we think the question was one of variance rather than a failure of proof, inasmuch as the purpose of the action as represented by the allegations of the complaint was to reach a right or interest of the debtor in the property which had, through the forms of the proceedings and conveyance been surrendered to his wife. And the case presented by the evidence *137and tbe facts found by tbe referee are not entirely remote from tbe cause of action alleged.

We have examined all tbe exceptions taken upon tbe trial, and to tbe findings of tbe referee, and think none of them well taken. .

Tbe judgment should be affirmed.

Judgment affirmed with costs, payable out of tbe proceeds of tbe sale directed by tbe judgment.