Court Opinion

ID: 8267572
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:12:18.662989+00
Date Added: 2024-06-11T16:43:25.198966
License: Public Domain

' The opinion of the court was delivered by
Depue, J.
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 Ins own purposes. It had no vitality until it was transferred bj^ 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,. *4091876, 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 lie 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 *410concur, an action lies. Baily v. Merrett, 3 Bulst. 94, Croke J.; Pasley v. Freeman, 3 T. R. 51; Upton v. Vail, 6 Johns. 181. To perfect a right of action or defence for such a cause, it must appear that the false representation and the damage bear to each other the relation of cause and effect. Byard v. Holmes, 5 Vr. 296 ; Gerhard v. Bates, 2 El. & Bl. 476.
The appellants gave the mortgage to Holmes, with the intent that it should be used by him for his own benefit. The parties contemplated that it should be an efficient security for the sum of money mentioned in it. Whether it was used by Holmes as collateral. security for an existing indebtedness, or for the purpose of raising money on it, would not diminish or increase the liability of the mortgaged premises as n security, and its use for the one purpose instead of the other, did not occasion any injury to the mortgagor. The mortgagor had no interest in any particular transaction of Holmes, for the payment of which the mortgage was intended. He was induced to make and entrust the mortgage to Holmes solely by his desire to oblige him. Holmes had all the benefit of the mortgage he would have had if, instead of raising the money on it, he had used it to satisfy or secure a debt, and the liability of the mortgagor was not increased by the negotiation of the mortgage to the l’espondent beyond what it would have been if Plolmes had used it as collateral security for a debt.
The object the parties had in view—the accommodation of Holmes—was accomplished by the negotiation of the mortgage to the respondent, though it was not effected precisely in the manner the mortgagor expected. Regarding the substance only of the transaction, the mortgagor was not defrauded by the use Holmes made of the mortgage. He was only disappointed in the manner in which Holmes saw fit to avail himself of the advantages of the security which the mortgagor was prompted to give him solely by his desire to accommodate a friend. A security made for the accommodation of another, on which it was understood that the money should be realized in a particular *411manner, is not fraudulently misappropriated if the money is obtained in a different way from that which was intended; if its negotiation effects the substantial purpose for which it was designed, it is not material whether it was effected in the precise manner contemplated, unless the interest of the party making it is prejudiced by the manner in which it was used. Duncan v. Gilbert, 5 Dutch. 521.
The decree should be affirmed, with costs.
Decree unanimously affirmed.