Court Opinion

ID: 6413723
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:54:35.014118+00
Date Added: 2024-06-11T15:51:27.862350
License: Public Domain

Chapman, J.
The defendant Crosby sets up in his answer a discharge in insolvency, and a release of the notes in suit, executed by the plaintiff and several other creditors of the defend ants. The plaintiff in his replication alleges several fraudulent •acts of Crosby in avoidance of the discharge, and among others a mortgage to Rice, Kendall & Co., made within six months .prior to the time when Moore & Crosby went into insolvency; and also that the assent of the plaintiff to the discharge in insolvency was obtained by certain fraudulent representations of -Crosby; and that the release was obtained by concealment and ,the fraudulent representation that it was merely an assent to a discharge in- insolvency.
1. The first exception to the rulings of the presiding judge which is insisted on at the hearing is to the admission of the certified office copies of two mortgages of personal property *331made by Moore and Crosby; one of which was to one Hill, and the other to Rice, Kendall & Co.
It has long been settled that where a party has occasion to offer evidence of a deed of real estate, in which he is not the grantee, or where from its nature it is not presumed to be in his custody or power, a certified office copy is admissible. Eaton v. Campbell, 7 Pick. 10. Scanlan v. Wright, 13 Pick. 523. Ward v. Fuller, 15 Pick. 185. Since the existence of our statutes for the registration of mortgages of personal property, the same rule of evidence has been applied to them. Pierce v. Gray, 7 Gray, 67.
2. The second exception is to the ruling respecting the effect of the mortgage to Rice, Kendall & Co. If we analyze this ruling, it will be seen that it embraces all that is required by St. 1841, c. 124, § 3, to invalidate a discharge. It requires the jury to find that Moore & Crosby were unable to pay their notes and meet their business engagements in the ordinary course of business. Such a state of things constitutes insolvency within the statute. Thompson v. Thompson, 4 Cush. 127. Lee v. Kilburn, 3 Gray, 594. It also requires them to find that they knew the fact of their insolvency ; that the mortgage was of personal property in their possession, was to secure a preexisting debt, and was made within six months before their going into insolvency.
But it was further ruled that such a mortgage would invalidate the discharge, although the property thus mortgaged was subject to previous mortgages to more than its value, and the mortgage was given with the intention to make it effective by a payment of the previous mortgage at some future time, and with the intention and expectation of paying all their creditors at some future time. This is the part of the ruling which is specially objected to. The mortgage thus given was a conveyance of Moore & Crosby’s right to redeem the mortgaged property ; and if it should rise in value, or if the prior mortgage should be paid, the mortgagee would have the benefit of it. It was none the less a conveyance bj them, “ intending to give a preference to a preexisting creditor,’ .han if its value had been sufficient to give him an ample and immediate security for his *332whole debt. The object of the statute was to prohibit this whole class of conveyances, whatever might be the value of the property conveyed. And an intent or expectation of the debtor to pay all his creditors at some future time is very different from an intent to pay them in the ordinary course of business. It is quite consistent with an intent to hinder and delay them for a long period, and has no tendency to relieve a debtor from the consequences of making a mortgage with intent to give an illegal preference to a creditor.
3. The third exception is to the ruling that if the defendant made the representations alleged, namely, that if the plaintiff did not sign the instrument referred to, the assignees, or creditors, or both, were intending to make him out a partner in the firm of Moore & Crosby, and so invalidate his mortgage, and he made them fraudulently, knowing them to be false, and in order to gain a private advantage, and they were the inducement and cause of the plaintiff’s signing the release and assent to the discharge, the plaintiff could avail himself of the fraud to avoid the instrument.
It is said that such a representation related to a fact that was not material. But we do not so regard it. It professed to give the plaintiff information that others were about to involve him in litigation, and endeavor to deprive him of his security. Such a proceeding might affect him very materially. And the rule is well settled that where one party induces another to contract with him, by a false and fraudulent representation as to a matter of fact within his own knowledge, or affirmed by him to be within his own knowledge, and materially affecting the interest of the other party, if the latter places confidence in such representation, and is in fact deceived by it, he may avoid the contract. Hazard v. Irwin, 18 Pick. 95. The principle is applicable as well to an assent of a creditor to the discharge of his debtor in insolvency as to any other contract.
The qualification which was added to this ruling, that mere untruth in representations would not constitute fraud, nor any general representations of what would be for the plaintiff’s interest, was all that the utmost caution would seem to require.
*3334. The defendant relied on a single instrument, which contained both the assent to his discharge in insolvency and the release of debts; and asked the court to rule that, so far as the release was concerned, the plaintiff must be held to a proof of the same fraud set forth in his replication, to wit, the representation by Crosby that the paper was merely an assent to his discharge in insolvency. The court declined so to rule, and this refusal is excepted to.
This exception assumes that the instrument may stand as a release, though it should be avoided as an assent to a discharge, because it was fraudulently obtained. But if the execution of it was procured by fraudulent representations as to any material particular, the whole is tainted by the fraud, and it is entirely void.
The ruling in respect to the instrument as a composition deed was in favor of the defendant; and the further rulings as to the effect of the fraudulent representations contain no new principle, but are substantially embraced in the rulings already considered.

Exceptions overruled.