Sabatino v. D'Aloise

• Decision Date: 12 January 1931
• Citation: 152 A. 761
• Parties: SABATINO v. D'ALOISE et al.
• Court: New Jersey Court of Chancery

152 A. 761

SABATINO

v. D'ALOISE et al.

Court of Chancery of New Jersey.

Jan. 12, 1931.

Syllabus by the Court.

The assignee of a mortgagee who purchases the mortgage in good faith for an original valuable consideration, as distinguished from a pre-existing indebtedness, takes it free from latent or secret equities created by the mortgagee in favor of third persons of which the assignee does not have notice, but takes it subject to all the defenses which the mortgagor, or those who have succeeded to his rights, may urge against it.

Syllabus by the Court.

While culpable negligence in some circumstances will be operative as a bar to affirmative equitable relief to a negligent suitor, that rule cannot be asserted to deny a mortgagor relief against his mortgagee based on the fraud practiced by him, since it is the very purpose of fraud to cheat its victim by making him neglect the precautions essential to prevent injury; and to deny relief from fraud because the victim was negligent would only be operative to encourage dishonesty.

Syllabus by the Court.

The rule requiring investigation is not applied when there exists a relation of trust and confidence which disarms the victim.

Syllabus by the Court.

A wife in fraudulently co-operating with her husband in causing a property held by a third person under a naked trust for her husband to be conveyed by the trustee to another as an absolute estate may be enjoined from thereafter asserting against the vendee a dower interest in the property so conveyed.

Syllabus by the Court.

The assignee, in good faith for a valuable consideration, of a mortgage first of record, takes free from equities in favor of another mortgage on the same property later recorded in violation of an engagement of another to record it first in order.

Suit by Onofrio Sabatino against Felix D'Aloise and others.

Decree for complainant.

The solution of this controversy is controlled by a determination of the rights which may flow to an assignee of a mortgage on real estate who in good faith has purchased from the mortgagee for valuable consideration a mortgage which had been executed by the mortgagor to the mortgagee for an amount in excess of the true amount due thereon, in a case in which the mortgagor was ignorant of the fact that the mortgage was for an excessive amount by reason of fraudulent deception on the part of the mortgagee and the failure of the acknowledging officer to perform her duty.

The facts are not susceptible of doubt. Complainant, the mortgagor, is an Italian who does not understand the English language. Defendant D'Aloise, the mortgagee, is an Italian who is familiar with English and was engaged in the real estate business in Camden, and who appears to have enjoyed the confidence of all who knew him. Complainant agreed to purchase from D'Aloise a house and lot on Sylvan street, Camden, for $3,300, and to pay for it by executing two mortgages which were to aggregate $3,300; one of the mortgages was to be on the Sylvan street property so purchased, the other on a house and lot on Royden street, which was owned and occupied by complainant. It was immaterial to complainant how the two mortgages were to be apportioned; D'Aloise was to determine that. The legal title to the Sylvan street property then stood in the name of one Keliher and wife, but the property was owned by D'Aloise. Complainant had implicit confidence in D'Aloise. and intrusted to him the preparation of all the papers, and confidently signed all papers so prepared for his signature.

The method adopted by D'Aloise to swindle complainant and others was as folows: D'Aloise borrowed from defendant Cashman $2,800, and offered her as security a mortgage for $2,000 on the Sylvan street property and another mortgage for $800 on the Royden street property. He then caused Keliher and wife to convey the Sylvan street property to complainant, and caused complainant to execute a $2,000 mortgage on that property to defendant Cashman and also an $800 mortgage to Cashman on the Royden street property. That left a balance of $500 of the purchase price due from complainant to D'Aloise. To secure that balance D'Aloise prepared another mortgage from complainant to himself for $2,500 on the Royden street property instead of the proper amount of $500, and caused complainant to sign it at the same time all the other instruments already referred to were executed. D'Aloise at the same time informed Cashman that his $800 mortgage was a first lien on the Royden street property. All the instruments were left with D'Aloise to be recorded. He then recorded his fraudulent $2,500 mortgage on the Royden street property ahead of the $800 mortgage which he had represented to Cashman to be a first mortgage. That left D'Aloise with a first mortgage lien of $2,500 on complainant's Royden street property, whereas he should have had only a $500 second mortgage lien. D'Aloise then assigned the fraudulent $2,500 mortgage to defendant Moore, an' innocent purchaser of the mortgage for valuable consideration. Moore took the assignment of the mortgage without procuring a declaration against defenses from the mortgagor or making any inquiries from any one except D'Aloise touching the mortgage. This swindle on the part of D'Aloise was made possible by reason of the implicit confidence imposed in him by all the parties, together with the aid he received from his wife who was a notary public and who certified acknowledgments of complainant to the $2,500 mortgage without acquainting him with the nature of the instrument which he signed. D'Aloise is now serving time in prison. He was brought to court in custody of an officer to enable him to hear the testimony and to testify, but he did not testify.

Complainant now seeks to be relieved from the $2,500 mortgage to D'Aloise (which is now held by Moore) except as to the true amount of $500. Cashman seeks to preserve the lien of his $800 mortgage as a prior lien to the mortgage held by...