Fairchild v. McMahon

Headnote

Vendor and Purchaser—False Statement of Consideration—Foreclosure of Purchase-Money Mortgage.

Where the purchaser of property for $7,000 reserves the right to name the consideration thereof in the conveyance to herself, and accordingly states such consideration therein to have been $12,000, and a few weeks afterwards, through her agents, in selling the property, falsely exaggerates the consideration paid by her, such exaggeration is a good defense to an action to foreclose a mortgage taken by her on the property so sold, for part of the purchase price, and, where the amount of the exaggeration exceeds the debt secured, the mortgage is thereby discharged.

Appeal from special term, Kings county.

Action by Clara Fairchild against Lucy Ann McMahon to foreclose a mortgage given by defendant to secure a difference in plaintiff’s favor on the exchange of certain premises. The defense was a fraudulent representation by

plaintiff and her agents as to the value of her property taken by defendant in exchange. From a judgment for defendant, plaintiff appeals. Affirmed.

The opinion of .Mr. Justice Cullen at special term was as follows'

“I cannot resist the conclusion that, in the exchange of properties on which the mortgage in suit proceeded, the defendant was imposed upon. A mere statement of value, though stated as fact and made fraudulently, does not give a right of action. Ellis v. Andrews, 56 FT. Y. 83. But a statement of the price paid by the vendor, as well as statements of other facts affecting the value, if false and fraudulent, will give a right of action. Here, if the facts be as testified to by defendant’s husband, there was a direct, positive statement of the price paid by the vendor, and her purchase was but a few weeks prior to the sale to the defendant. The price paid at so recent a purchase might well affect the defendant’s judgment as to value. But artifice was used to aid this result. In the deed to the representative of the real owner and vendor to defendant, the consideration was stated as $12,000, though but $7,000 was the true price, and the right to dictate the consideration to be expressed in the deed was expressly reserved to the vendee in the contract of purchase. This could have been done with but one object,—to mislead subsequent purchasers as to the true price. As to the question of fact, I find that in favor of the defendant. While defendant’s case rests on the testimony of her husband alone, and that is contradicted by the agent, Benner, Benner is in conflict with several other witnesses, and, as already stated, the insertion of the exaggerated consideration in the deed confirms-the statement of McMahon. The vendor was liable for the fraud of her agent. Krumm, v. Beach, 96 FT. Y. 398. I find also that the value of the property did not exceed from $7,000 to $8,000, and the defendant, relying upon the statement of the agent, believed it to be at least $12,000, and that hence she was damaged in a greater sum than that represented by the mortgage in suit. Judgment for defendant, with costs. ”