Jacobsen v. Dodd.

shall be made of the lands and tenements, goods and chattels of the said defendant, William E. Jacobsen, as specifically prayed in the bill of complaint filed in this cause, it appearing to the court that notice that such relief was sought by said bill has been duly served and given to said defendant, according to law and the rules of this court, and that a writ of fieri facias therefor do issue accordingly out of this court against said defendant for that purpose, payment of the said deficiency being hereby decreed to be made by the defendant, and that the sheriff make return to this court of his proceedings by virtue of the said writ.

And it is further ordered, adjudged and decreed that the defendants stand absolutely debarred and foreclosed of and from all equity of redemption of, in and to the said mortgaged premises, when sold as aforesaid by virtue of this decree.

Mr. A. M. Hassell, for appellants.

The appellants insist that, at the time when the respondent purchased the bond and mortgage from Hugh Holmes, there was a valid defence to the same, which would have avoided them in the hands of said Hugh Holmes. That said defence, existing before and at the time of purchase, is now valid, though the instruments are in the hands of a bona fide purchaser for value.

The defence existing at the time the instruments were assigned to the respondent, was

(1) Fraud; (2) Want of consideration.

I. The fraud consisted in this: A deceitful and false representation by Hugh Holmes to the appellants, by which he induced them to execute the instruments to him, intending and knowing they would and did act thereon. The false statements made were, first, that he wanted the instruments to deposit with a creditor of his, and that this creditor was to hold it for security merely, for an antecedent debt; second, the false representation as to his financial condition.

Jacobsen v. Dodd.

II. The other defence is, the want of consideration. In itself this is a perfect defence against these instruments under the testimony in this case. I do not pretend to advance or advocate the doctrine that a man may execute a bond and mortgage to another with the intent and purpose that the mortgagee shall make such disposition of it as he chooses, in order to raise money thereon to help himself, and that, in such a case, the want of consideration may be set up as against a bona fide holder for value. What I do desire is, that this court take notice of the distinction between such a state of facts and the present case, and that the court will take notice of the facts in this case as establishing the case of a man who has been tricked into the execution of the instrument sought to be enforced, and in such a case the doctrine of estoppel has never been applied against the grantor.

The first insistment is, that deceit was practiced upon us by Hugh Holmes to obtain the bond and mortgage, and a fraudulent representation made as to his financial status; that the respondent was not a creditor who was pressing Hugh Holmes for a settlement of his claim, and was willing to take our mortgage as a collateral security to the debt. It was said below that this last representation could not avail the appellants, because we do not show that Holmes knew it to be false when made; in other words, it was incumbent on us to show the scienter. This is true if the case was tried by the rules of the common law; but it is not true as tried by the principles of equity. The rule in equity is as follows: Whether the party misrepresenting a material fact knew it to be false or made the assertion without knowing whether it were true or false, is wholly immaterial (Wright v. Snowe, 2 De G. & Sm. 321); for the affirmation of what one does not know or believe to be true, is equally, in morals and law, as unjustifiable as the affirmation of what is known to be positively false. Anslie v. Medlycott, 9 Ves. 21; Taylor v. Ashton, 11 M. & W. 401; Doggett v. Emmerson, 3 Story C. C. 733. And even if the party innocently misrepresents a

Jacobsen v. Dodd.

material fact by mistake, it is equally conclusive, for it operates as a surprise and imposition upon the other party. 1 Story's Eq. Jur. (10th ed.) § 193, and cases cited.

Again, it is said: If a man, upon a treaty for any contract, makes a false representation, whether knowingly or not (Anslie v. Medlycott, 9 Ves. 21; Graves v. White, Freem. 57; Scott y. Scott, 3 Ves. 458, 1 Cox 365), by means of which he puts the party bargaining under a mistake upon the terms of bargain, it is a fraud relievable in equity. Neville v. Wilkinson, 1 Bro. C. C. 546; Evans v. Bricknell, 6 Ves. 174; Burroughs v. Lock, 10 Ves. 475; De Mannerville v. Crompton, 1 Ves. & B. 355. See 1 Madd. Ch. (3d Am. ed.) 262.

Hence, the distinction between actual fraud, or that where there is an intent shown (which is the kind the common law deals with), and constructive fraud, a creature of equity, which includes all acts, omissions and concealments which involve a breach of legal or equitable duty, trust or confidence justly reposed, and are injurious to another. 1 Story's Eq. Jur. (10th ed.) § 187.

The respondent meets this defence by alleging that the consideration received by us was two $1,000 mortgages and a deed, and the good will we entertained toward Holmes. In answer to this we say, that any securities voluntarily handed to us by Holmes, after the contract and execution thereof by all parties to it, could in no way prejudice us.

Mr. George F. Tuttle, for respondent.

I. The evidence shows that the respondent was the bona fide assignee, for full value, of the bond and mortgage in suit, and without notice of any fraud in the giving of the mortgage, if any there was; his rights, therefore, should be protected.

II. The facts insisted on as constituting fraud, even if true, are immaterial, and made no difference to the appellants. Holmes's failure left the same, and only the same, responsibility upon them in either event.

Jacobsen v. Dodd.

III. But the evidence shows that there was no such state of facts existing as is claimed to constitute fraud. The appellants received, by assignment, in exchange for the mortgage in suit, two mortgages for $1,000 each, had the assignment recorded, and afterwards, with full notice of the respondent's rights, deliberately passed these mortgages away, thus putting it out of their power to tender them back.

The mortgage in suit was, therefore, not without consideration, and the rights of the respondent, as assignee thereof in good faith and for value, are valid. Bryan, 2 Stock. 146.

The opinion of the court was delivered by

DEPUE, J.

Cornish v.

This bill was filed by the respondent to foreclose a mortgage made by the appellants. The mortgage was given to one Hugh Holmes as mortgagee, and is for the sum of $2,000. It was executed on the 1st of October, 1875, acknowledged on the 2d, and recorded on the 6th of October. Holmes assigned the mortgage and the accompanying bond to the respondent, on the 2d of October, and received for it the full consideration of $2,000.

The defences to the foreclosure suit are: First-That the mortgage was without consideration. The mortgage was made and delivered to Holmes for the accommodation of the latter, to enable him to use it for his own purposes. It had no vitality until it was transferred by Holmes, and on its assignment by him to the respondent it acquired ample consideration for its support.

Second-That the mortgage was procured by fraud, by means of the false representations of Holmes as to his financial condition. The mortgagor, Jacobsen, testifies that Holmes, when he solicited the mortgage, represented that he was worth $50,000 after all his debts were paid. Holmes filed a petition in bankruptcy on the 19th of December,

Jacobsen v. Dodd.

1876, and was subsequently discharged as a bankrupt; but there is no evidence of his financial condition at the time the mortgage was made or assigned. It is superfluous to say that the testimony of Jacobsen, that he afterwards found out that Holmes's statements on that subject were false, is not competent evidence of the fact.

Third-That the mortgage was made for a specific purpose, and was fraudulently used by Holmes for another purpose. The testimony of Jacobsen is, that Holmes was in need of money to meet the pressing claims of creditors, and applied to him as a friend for assistance; that Holmes said that "a party was pressing him for some money; that if he had a friend who would stand by him to help him, or assist him, or go security for him, in six months he would work himself out all clear, or otherwise he would be compelled to make forced sales of his property and sacrifice on it. I told him that, as he had befriended me, I would befriend him if I could do it without any risk to myself. He said a mortgage might help him. Well, then,' said I, 'Mr. Holmes, I'll lend you a mortgage, if you are sure you can return it in six months, or about that time, without any injury to me.' He said he could-he knew he could." The witness further testified that the arrangement was that the mortgage was to be used by Holmes as collateral security for a debt.

Of these facts the respondent was entirely ignorant. He took an assignment of the mortgage in good faith, and paid Holmes the full amount of money mentioned in it. It is manifest that, under these circumstances, this defence is not maintained.

Independent of those cases of implied or constructive fraud which arise out of a breach of duty, trust or confidence presumed from the fiduciary relations subsisting between the parties, fraud, as a ground of relief, whether as a cause of action or a defence, consists in the conjunction of wrong and injury. Fraud without damage, or damage without fraud, gives no cause of action; but where the two