Wells v. McMahon

• Decision Date: 02 February 1888
• Citation: 3 Wash.Terr. 532,18 P. 73
• Parties: WELLS ET AL. v. MCMAHON.
• Court: Washington Supreme Court

18 P. 73

3 Wash.Terr. 532

WELLS ET AL. v. MCMAHON.

Supreme Court of Territory of Washington

February 2, 1888

Appeal from district court, Second district, at Tacoma.

Action to foreclose a mortgage by Sarah McMahon against Abraham Simon and Rachel, his wife, in which M. D. Wells & Co. were made parties defendant, as having some lien on the mortgaged premises. Said Wells & Co. filed an answer charging that the mortgage was given to delay and defraud creditors. Judgment for plaintiff, and defendants Wells & Co. appeal.

TURNER, J.

The question in this case is whether the mortgage for $700 given by Abraham Simon and Rachel Simon, his wife, to the appellee is void, as against creditors of the said Abraham Simon because made with intent to hinder, delay, or defraud creditors, of which intent the appellee had notice. The appellee, in loaning the money to Simon which said mortgage secured, acted by and through her agent at Tacoma, and consequently was bound by notice which came to him.

The only finding of the trial court on the question of fraud was as follows: "That said mortgage was negotiated and taken by this plaintiff by and through her said agent and attorney in good faith, and without any intent or design on the part of plaintiff or her said agent, to hinder, delay, or defraud any creditor or creditors of the said Abraham and Sarah Simon, or either of them; and there is no evidence tending to show that any creditor of said Abraham Simon was defrauded." This finding did not fully respond to the issues made, and it ignored vital facts proven, which required different conclusions of law from those reached. The answer charged the agent of the appellee with actively conspiring with Abraham Simon to defraud his creditors, and particularly the appellant. The evidence did not sustain this charge, but the answer called for a finding on the question whether it was any part of Simon's purpose, in negotiating the $700 loan, to hinder, delay, or defraud his creditors; and whether the agent of the appellee had such knowledge, or means of knowledge, of that intent as, under the principles of law applicable to such cases, would postpone his principal mortgage to the lien of the appellant's attachment. Findings ought to have been made upon these questions, and, upon both, ought to have been against the appellee. After reading the testimony carefully, we are of opinion that one purpose of Simon in borrowing the money from the appellee, and securing the same by mortgage, was to make it difficult for his creditors to reach his property, by incumbering the same, and by getting as much of it into cash as possible, and putting the latter into his pocket. We are also of the opinion that the agent of the appellee was made acquainted with facts during the negotiations for the loan sufficient to enable him to know the intent of Simon in the matter if he had followed the disclosures up with the diligence which the law exacts of one dealing with a failing creditor. He was doubtless impressed with his duty to his principal to make advantageous loans for her, if he ever knew of the obligations which the law imposed upon him in the interest of the general creditors of the man with whom he was dealing. However innocent he may have been, and we impute to him no wrong whatever, the law charges him with all that he might have known concerning Simon's purpose by the use of ordinary diligence; and the law imputes to his principal all that he knew, or ought to have known. Assuming, then, the fraudulent intent of Simon in the premises, and the knowledge of that intent by the agent of the appellee, there is no room for controversy as to the law of the case. The mortgage made by Simon to the appellee was fraudulent and void as against the creditors of Simon. The judgment of the lower court ought to be vacated, and judgment should be entered here, granting the relief prayed by appellants in the answer, to-wit, that the lien of appellee's mortgage be declared inferior to the lien of their attachment, and it is so ordered.

JONES, C.J., and LANGFORD, J., concur.

ALLYN J., ( dissenting.)

The appellee, Sarah McMahon, brought suit for foreclosure in the district court at Tacoma on a mortgage made by A. Simon and wife to appellee, February 28, 1885, to secure a note for $700 made at that date to her. The appellants, M. D. Wells &amp Co....