Court Opinion

ID: 5565033
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:58:27.213342+00
Date Added: 2024-06-11T08:35:35.332272
License: Public Domain

Bleckley, Chief Justice.
1. Eor a mortgage made by a debtor in favor of one of his creditors to be defeated by his fraudulent intent as against other creditors, two things must be shown: first, that such fraudulent intent existed; and, second, that the mortgagee was connected with the fraud, either by participating in the intent, or by having notice of it or grounds for reasonable suspicion. On the first of these questions, acts and declarations of the debtor, indicative of such intent, are competent evidence, without reference to whether they were known to the mortgagee or not. And to render them competent, it is not necessary that all of them should have transpired at or before the execution of the mortgage, or even before its foreclosure. A scheme of fraud may manifest itself partly before and partly after the main fact. Indeed, the only decisive éxternal circumstances capable of proof may all occur afterwards. The perpetration of a fraud rarely happens as an isolated act; it usually comprehends a course of conduct projected and pursued as means of securing the fruits.of the fraud. The fraudulent mind is selfish ; it wants to make something by its rascality. Acts embraced in the fraudulent scheme, *418and performed in carrying it- out to the ultimate selfish result contemplated, belong to the res gestee of the fraud ; and the same is true of any declarations accompanying these acts which tend to explain and give them character. To run down and expose an alleged fraud, it is-generally necessary to frame some hypothesis concerning the whole course and range of conduct which would be involved in the fraudulent scheme to render it successful. If the hypothesis, as such, be sound in itself, the next step is to ascertain by evidence whether the accomplished facts of the case conform to it. The investigation would be futile as a verification of the hypothesis were the evidence limited to a field of accomplished facts less extensive than that covered by the hypothesis. The unaccomplished facts, if any, though a necessary part of the hypothesis, could only be inferred as embraced in the projected scheme of conduct, since their non-accomplishment would preclude proof' of them as actual conduct. As evidence to establish the fraudulent intent of Hirschfield & Blumenthal, the mortgagors, in executing the mortgage to Claflin & Co., their acts and declarations connected with the hypothetical fraudulent scheme, their acts done and declarations made at any time from the conception of the scheme-down to the time of trial, would be competent; for so-long as the scheme was pending and anything remained to be done to take or to secure its fruits, it would neither be too early nor too late for them to manifest, their real intention. But the effect of the evidence was properly-restricted to the one purpose of convicting them of a. fraudulent intent. It could not be used to prove notice on the part of Claflin & Co. of that intent, or that they had grounds for reasonably suspecting it, or that they participated in the fraud in any manner whatever. It would simply supply one of the two necessary links in the chain of evidence necessary to vitiate the mortgage;. *419it would neither dispense with the other link nor supply any part of it.
2. The declarations made by Frank, the agent of Claflin & Co., whilst the official sale of the goods under the mortgage was in progress, merely asserted his own knowledge or suspicions, past and present, touching the fraudulent nature and purpose of the mortgage. He was certainly not the agent of his principals to make these declarations, for they were not pertinent nor appropriate to the transaction of any business which he was then transacting in their behalf. Surely an agent cannot destroy a mortgage by talking it to death after he has taken it and while attending a sale which an officer is making to convert the mortgaged goods into money. Any finding against the bona fides of the mortgage based on these declarations would be wholly unwarranted. “What Frank knew, or what he suspected on reasonable grounds of suspicion, at the time of taking the mortgage, would be imputable to his principals; but this would have to be proved by evidence other than his subsequent declarations. Any mere recital of his knowledge or suspicions by subsequent narration would not affect them. Nor would any knowledge acquired by him, or even by themselves, after the mortgage was executed and delivered, or any suspicions originating thereafter, count for anything.
3. As stated in the third head-note, the evidence was wholly insufficient on a vital part of the case, and the court erred in not granting a new trial.

Judgment reversed.