Arnoux v. Phyfe — 68 N.Y. St. Rep. 463

Majority

p. 463

William H. Arnoux, Resp’t, v. Amy C. Phyfe et al., App’lts.

(Supreme Court, General Term, First Department,

Filed June 14, 1895.)

Headnote

Evidence — Fraud—Mortgage.

On the issues of fraud in- procuring a mortgage, want of consideration and non-execution, evidence to show that the mortgage debt was paid before the execution of the mortgage, is admissible.

Aefeal from a judgment in favor of plaintiff.

Henry B. Johnson and Joseph N. Tuttle, for app’lts; C. N. Bovee, Jr., for resp’t.

It seems to us that the appellants are clearly right -in their assertion that the court excluded evidence which they were entitled to have considered in passing upon the issues presented by the pleadings. The issues raised by the answer were that the mortgage Was never executed, was without consideration, and obtained through the fraud of the plaintiff. It was proved that the mortgage was executed by the mortgagor, but whether there was a consideration for the mortgage, and whether procured through fraud, there was conflicting evidence. The learned trial judge, having had before him all of the parties and the witnesses, 'reached the conclusion that the consideration was ample, and that there was no fraud; the bond and mortgage instead having been executed with full knowledge on the part of the person executing it and all others interested. If all of the material and relevant testimony offered by the defendants had been received, we -would then be called upon to say whether the determinations of fact have such support in the evidence as entitle them to stand. As we think it very clear, however, that all of the evidence was not received, which should .have been, by the court, bearing upon such questions, a discussion of them is neither called for nor proper. The bearing of the evidence excluded will be readily appreciated from a brief statement of the principal'facts-affecting the issues.

William Campbell djed in April, 1888, leaving a will, by which he devised the' property covered by this mortgage to his executors in trust, the income and profits, during the life of testator’s wife, to be used by the executors in maintaining and carrying on his household and supporting his family as it then existed. The executors were further empowered to sell and dispose of any of the testator’s real estate upon such terms as they should deem best.

p. 464

The executors desired to raise $14,000 upon the property covered by this mortgage, to be used for purposes connected with the estate, and they were advised that they had not the power under "the will to mortgage the property for any such purpose, but did have full authority to sell it. So a relative — this defendant Amy 0. Phyfe — consented to appear in the role of a purchaser from the executors, and to thereafter execute a bond and mortgage for the amount of the loan, which plaintiff had agreed to procure for them from one of his clients, and then to reconvey the property to the executors. A search was made under the direction of the person in charge of' the real-estate department in plaintiff’s office, who as well prepared the deed and bond and mortgage and all other papers executed or prepared for the purpose of passing title, giving bonds and' mortgages, and revesting the executors with title. There were two bonds and mortgages, however, executed by the grantee at about the same moment of time, — one tó Miss Morss • for $14,000, for a loan of like amount made; and the other to this plaintiff for $15,153. The alleged consideration for the latter mortgage was the payment by the plaintiff to the Chemical National Bank of a judgment in form against William Campbell for a sum which, with interest added, equaled the face of the mortgage. The plaintiff and Mr. Foster, who prepared the papers, testified that the execution of this mortgage was talked about and understood as fully by all the parties present as was .the execution of the mortgage to Miss Morss. On the other hand, Amy C. Phyfe, this mortgagor, testified that she never heard of any such mortgage; that the papers were laid,down before her for signature by Mr. Foster, and she signed them without inquiry; and she was corroborated by her father, John D. Phyfe, Joseph Campbell, and Martha Campbell, who were also present, the two last named being executors of the will of William Campbell. As affecting the question of consideration, it was proved that the plaintiff had taken an assignment from the Chemical National Bank of the so called “ judgment” against William Campbell. The judgment is thus referred to because it was not in fact entered until after Campbell’s death, when it was entered as if he were living. The defendants through ■questions put to various witnessess, offered to prove that the note indorsed by William Campbell and' guaranteed by this plaintiff was made by Phyfe and Campbell to enable them to obtain money to be used in completing the Plaza Hotel, in which William Campbell had no interest whatever, his relation to the makers being that of an acoinmodation indorser. This was followed by an attept to show that this plaintiff was a pártner in the venture of Phyfe and Campbell, and to that end a writing signed by them and- the plaintiff was offered in evidence and excluded. By questions asked of the plaintiff while under cross-examination it was attempted to show that he had an interest in the venture which absorbed the moneys obtained from the note which Campbell indorsed for the accommodation of the firm. This in turn was followed by an attempt to prove that a settlement was had with the plaintiff after the judgment was entered, and before the making of

p. 465

this mortgage, by which there was conveyed to him certain property on Ninety-eighth street in satisfaction of his claim under this judgment and other claims. This will more clearly appear from the following questions, which were asked of John D. Phyfe, all of which were objdcted to, and excluded by the court, the defendant excepting:

“Q. You have heard the statement with regard to some money obtained, — a loan obtained from the Chemical National Bank,— have you ? A. I have heard part of it. Q. Who obtained the money ? Did you make any arrangement with Mr. Arnoux with regard to the procuring of that money before it was procured ? Q. Were you also the party who was building the property in Ninety-eighth street, subsequent to this occasion ? Did you-make any arrangement with Judge Arnoux for the payment of the judgment after it was transferred to him by the Chemical Bank ? Q. What did you agree to pay him in satisfaction of that judgment? Q. Did you agree to give him two of the houses in Ninety-eiglith street in payment of his claim, including his claim against the estate of William Campbell ? Q. State whether, after that agreement was made, and in pursuance of that, you procured the transfer of the title to that property in Ninety-eighth street to Judge Arnoux in satisfaction of that agreement.”

We take from the record certain questions tending in the same direction, which were asked of Jane Phyfe, and excluded by the court under plaintiff’s objection, and to which defendants took exceptions:

“ I reside at No. 249 Lexington avenue, Brooklyn. I am a daughter of William Campbell, deceased, formerly of 62 South Fifth avenue, and sister of these executors. Q. Did you ever have the title to the Ninety-eighth street property that has been testified to ? Did you ever make a deed of that property ? Q. Did you ever have a conversation with the plaintiff, William H. Arnoux, as to making a deed of Ninety-eighth street property ? Q. Was anything said by Judge Arnoux to you in regard to taking the property in Ninety-eighth street in payment of a judgment of the Chemical Bank which had been assigned to him, or any portion of it ? Q. What was that statement ? Q. Did you, in pursuance of that conversation, convey that property to Judge Arnoux? Q. Was that conveyance made prior to the 10th of June, 1892?”

It may well be that the witnesses would not have testified as the questions indicate, but, as they were not permitted to answer, because of plaintiff’s objection, we can only consider whether the defendants were entitled to make proof of the character called for by the inquiries. That they were entitled to is clear. The answer put In issue the consideration for the mortgage, and if the fact were that prior to the date when the mortgage was executed the plaintiff had received the Ninety-eighth street property in full payment of the judgment, and al]§ claims against William Campbell, then there was no consideration whatever for this mortgage. The defendants were also entitled to have this evidence considered

p. 466

by the court upon the question of fraud. The plaintiff, on his. cross-examination, was asked what became of the proceeds of this-note ; whether he was interested in the partnership which constructed the Plaza Hotel; and further:

“ Q. Did you receive any collateral or securities for your guarranty of those notes, or either of them ? Q. Did you receive a, conveyance of property in Pennsylvania at the time your guaranty, and as a consideration for it? ”

if the testimony of the Phyfes and Campbells were true, that-nothing was said to them, or in their hearing, about this mortgage at the time of its execution, and that they knew nothing of it, then the defense pleaded would have been' established. But the court found that it was not true, that they knew all aboutit, and the-bond and mortgage was executed with a full understanding of the situation. Whatever there was of corroborative evidence upon that issue, therefore, the defendants were entitled to. Would it not have corroborated them -to some extent to have proved that the plaintiff had been paid in full? Do parties interested as executors and beneficiaries usually give mortgages upon the.property with the management of which they are charged, or in which they are beneficially interested, without getting anything in return? Is that the usual and ordinary course of human action ? If not, then the silence of these parties when executing a mortgage corn stituting a gratuity equal almost to the value of the property over and above the first mortgage tended strongly to corroborate their testimony that they had no intention of doing it, and did not know that it was being done. It may be that the fact wot not as defendants attempted to prove, but we must assume otherwise, and, so assuming, the conclusion reached seems to be required.

The judgment should be reversed, and a new trial granted, with costs to the appellant to abide the event.

All concur.