Evidence as to Allegation admitted in Answer.—If the answer in replevin admits the value of the property averred in the complaint, evidence should not be admitted as to its value.
When Error not Ground for ¡New Trial. — If the Court erroneously allows respondent to introduce evidence upon a matter not denied in the answer, but the appellant is not prejudiced thereby, a new trial will not be granted.
Mortgage to secure Future Advances not Fraudulent.—A note and mortgage given in good faith for a greater sum than is due by the mortgagor to the mortgagee, to secure both a present indebtedness and future advances to be made by the mortgagee, is not fraudulent in law as to the creditors of the mortgagor because given for a greater sum than is due, even though the mortgage does not express upon its face that the excess is for future advances.
Mortgage to secure Future Advances.—A mortgage given in good faith for the purpose of securing future advances expected to be made,‘is a good and valid security. Such mortgage need not express its object upon its face, although it is better it should.
Fraudulent Mortgage.—A mortgage knowingly given for a sum greater than is due, and not in good faith, as a pretended security for future advances, is fraudulent in law as to the creditors of the mortgagor.
Evidence op Value of Property in Replevin.—In replevin evidence may be admitted of the highest market value of the property between the time of conversion and trial.
Fraudulent Intent a Question op Fact.—The question whether a mortgage given for a greater sum than is due was given in good faith, both for a present indebtedness and to secure future advances to be made, is one of fact for the jury under proper instructions from the Court.
By the Court, Sanderson, J.: 1. The judgment was for a larger sum than was claimed at the commencement of the action, but it appears from an amendment which has been made to the transcript, by leave of this Court granted since the filing of the appellant’s opening brief, that the complaint was amended by leave of the District Court before the commencement of the trial, and that the amount claimed by the amended complaint was in excess of the sum for which judgment was given. This amendment of the transcript has, therefore, obviated the objection of the appellant to the judgment, whether meritorious or not, on the ground that it is in excess of the amount sued for.
2. The objection of the appellant to the admission of evidence as to the value of the property in suit should have been sustained, for the value alleged in the complaint was not denied by the answer, and, therefore, there was no issue as to the value to be tried. But the appellant was not prejudiced by the respondents going into evidence as to the value. On the contrary, had they not done so, they would have been entitled to a verdict for the full amount alleged in the complaint.
The claim, in this connection, that the Court mistook the [307]measure of damages, can have no place in the consideration of the case. There was no such question involved in the case. As already suggested, there was no issue as to the value of the property; there could, therefore, be no question as to the amount which the respondents were entitled to recover, if they recovered at all. The property was alleged to be of the value of three thousand four hundred and seventy-five dollars by the respondents, which was not denied by the appellant, but admitted because it was not denied. The verdict and judgment was for two thousand eight hundred and eighty-seven dollars and forty-nine cents, which is five hundred and eighty-seven' dollars and fifty-one cents less than the amount which the respondents were entitled to recover, if they recovered at all. The Court undoubtedly erred in going into the question as to damages at all, but as the appellant gained a saving of five hundred and eighty-seven dollars and fifty-one cents by the error, we are unable to perceive why he should complain.
3. The principal question involved in the case, and perhaps the only one requiring special notice, relates to the alleged fraudulent character of the mortgage, under which the respondents claimed a right to the possession of the property in suit.
Upon its face the mortgage was for the sum of three thousand dollars, but the amount actually due from Hogle to the respondents at the time the mortgage was given was only one thousand seven hundred and four dollars and twenty cents. The exéess of the mortgage over the debt was taken as security for future advances, as claimed by the respondents, but there was no statement to that effect contained in the mortgage itself. In view of the fact that the mortgage was given in part to secure future advances, without its being so stated apon the face of the mortgage, it is claimed on the part of the appellant that, as a matter of law, the mortgage was fraudulent, and void ab initio as against the creditors of Hogle, of whom Denniston, the bailor of the appellant, is
[308]
alleged to have been one. This proposition, however, is not sustained by the cases cited in its support.
Taaffe v. Josephson, 7 Cal. 352, involved the validity of a judgment by default in an attachment suit upon four promissory notes, one of which was not due, and it was held that the entire judgment was fraudulent and void as against subsequent attaching creditors of the defendant in the judgment, under the twentieth section of the Statute of Frauds.
In McKenty v. Gladwin, Hugg & Co., 10 Cal. 227, the question was whether a note drawing interest from date, which had been antedated, was fraudulent as to creditors, and it was held that it was.
In Scales v. Scott, 13 Cal. 76, it was held that a judgment upon a note which was given in advance of a portion of the consideration and drew interest on the whole sum from date, was void as against creditors, for the reason given in McKenty v. Gladwin, Hugg & Co.
In Wilcoxson v. Burton, 27 Cal. 228, it was held that the execution and delivery of a note by a debtor to his creditor for a sum greater than is actually due, for the purpose of defrauding other creditors, and a voluntary confession of a judgment thereon, renders the judgment fraudulent and void as to other creditors.
In Divver v. McLaughlin, 2 Wend. 600, a mortgage was given for eight hundred dollars to secure an indebtedness of not more than one hundred and fifty dollars, and probably not more than one hundred dollars. In Bailey v. Burton, 8 Wend. 339, a mortgage for three hundred dollars was given upon property worth five hundred dollars, to secure a liability for one hundred dollars, incurred by the mortgagee in behalf of the mortgagor. Both were held to be fraudulent.
Thus it appears that in none of these cases was the question as to the validity of a note or mortgage, given to secure future advances, involved. They merely establish the doctrine that a note or mortgage given for a greater sum than is due is void in any event, so far as the excess is concerned, and in toto unless satisfactorily explained.
[309]It is well settled that a mortgage or judgment made or taken in good faith, for the purpose of securing future advances, or debts expected to be contracted in the course of dealings between the parties, is a good and valid security. (4 Kent’s Com. 175; Commercial Bank v. Cunningham, 24 Pick. 274; United States v. Hoe, 3 Cranch, 73; Brinkerhoff v. Marvin, 5 Johns. Ch. 326; Frye v. Bank of Illinois, 11 Ill. 381.)
It is also well settled that a mortgage given to secure future advances need not express the object upon its face, though it would be better if it did. (Shirras v. Caig, 7 Cranch, 34; Craig v. Tappin, 2 Sandf. Ch. 78; Lyle v. Ducomb, 5 Binney, 585; Stover v. Herrington, 7 Ala. 143.)
The true principle deducible from the foregoing cases seems to be, that a mortgage knowingly and intentionally given and taken for a larger amount than is due, and not as security for future advances, is fraudulent as against the other creditors of the mortgagor; but that a mortgage given in good faith, in whole or in part to secure future advances, whether the object be expressed in the mortgage or not, is valid to the extent of the lien therein expressly created. It must show upon its face the utmost amount intended to be secured, but it need not show whether that amount represents an existing debt or future advances.
A mortgage which misrepresents the transaction between the mortgagor and mortgagee, is liable to suspicion, and ought to be critically examined; but if, upon investigation, the real transaction turns out to be fair, and to have been had in good faith, it would be unjust to deprive the person claiming under it of his equitable rights. It is always better, however, for obvious reasons, that the mortgage should-be drawn so as to show the true object and purpose of the transaction, for suspicion is engendered by misrepresentation, but disarmed by a statement of the truth. (Shirras v. Caig, 7 Cranch, 34.)
4. It is provided by the twenty-third section of the Statute of Frauds that in all cases arising under its provisions the question of fraudulent intent shall be deemed a question of [310]fact and not of law. The question whether the mortgage was taken in good faith to secure an existing debt and future advances to the amount, both included, of three thousand dollars, or with intent to hinder or delay the other creditors of Hogle, was for the jury to determine, under proper instructions from the Court. The instructions of the Court have not been brought up, and it must, therefore, be assumed that they were in all respects consistent with the law of the case.
Upon the evidence alone, either in respect to the question of fraudulent intent or the immediate delivery of the crop when harvested, we cannot disturb the verdict.
Order denying a new trial affirmed.
Mr. Justice Rhodes did not express an opinion.
AI Brief
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Holding. A mortgage given in good faith to secure future advances is valid even if the mortgage does not explicitly state that purpose on its face, provided the transaction is fair and the intent is not fraudulent.
Issues
Whether a mortgage for a sum greater than the actual debt is void as a matter of law if it fails to state it secures future advances.
Whether the question of fraudulent intent in a mortgage is a question of fact for the jury.
Disposition. affirmed
Quotations verified verbatim against the opinion
“a mortgage given in good faith, in whole or in part to secure future advances, whether the object be expressed in the mortgage or not, is valid to the extent of the lien therein expressly created.”