Housatonic Bank & Lee Bank v. Martin

42 Mass. 294

• Court: Massachusetts Supreme Judicial Court
• Decided: September 15, 1840
• Status: Published

Opinion

Putnam, J.

The plaintiffs claim the goods in virtue of a mortgage from Turner & Laflin, dated April 20th, 1837, given to the Housatonic Manufacturing Company, a corporation, and one John King, Jr. and by said company assigned to the plaintiffs on the 6th of May, 1837, and by said King assigned to the Lee Bank, on the 23d of September, 1839.

The case finds that Turner & Laflin were indebted to the Housatonic Manufacturing Company, about $ 15,000 for goods sold and delivered, for which notes were given that were not to be considered as payment until the same should be actually paid ; and the plaintiffs discounted those notes, and are, without question, the bond fide assignees of the mortgage abovementioned.

The defendants claim to hold the property, in virtue of attachments made on several writs of creditors of Turner & Laflin against them, which were made long after the assignment of the Housatonic Manufacturing Company to the plaintiffs ; to wit, on the 3d of August, 1837.

The mortgage, so assigned to the plaintiffs, was made subject to a previous mortgage of Turner & Laflin to Abner Perry and others, to secure them for their liabilities for Turner & Laflin, which was executed on the same day. Said Perry and others were, on the same day, parties to a deed of general assignment, by Turner & Laflin, of all their property, subject to said mortgages, for the benefit of all their creditors.

The officer, who made the attachments, was informed of the claim of the mortgagees, and was forbidden, by one of them, to meddle with the property. And the case further finds that the mortgage to Perry and others, and the general assignment to them, have been adjudged tp be void, as being against St. 1836, c. 238, § 11. That case is in 22 Pick. 269, and the decision of the court was announced at the September term 1839. By the effect of that decision, the first mortgage was removed, and the plaintiffs, as assignees of the second mortgage, became entitled to all the rights which would have vested in them if the mortgage to Perry and others had never been made.

The ground on which the first mortgage was declared to be void was, that it was so connected with the general assignment made by the mortgagees and by Turner & Baffin, the mortgagors and assignors, as to constitute one instrument or transaction, for the accomplishment of one and the same object; which object was to give a preference to the said mortgagees over the other creditors of Turner & Baffin, contrary to the said St. 1836, c. 238, which provided for an equal distribution of the estate among the creditors who should become parties to such general assignment, except only debts which were preferred by law.

After the first mortgage was thus declared to be void, the plaintiffs, on the 25th of September, 1839, made their statement in writing, to the defendants, of the amount which they claimed under their mortgage, and made a demand of payment of the same. The defendants have contended that the statement was too general, and the demand too late.

The Rev. Sts. c. 90, § 79, require the mortgagee, when demanding payment of the money due to him, to state in writing a just and true account of the debt or demand for which the property is liable to him, and deliver it to the attaching creditor or officer. In this case, two statements were made on the said 25th of September, 1839. The last contained a recital of the mortgage to the Housatonic Manufacturing Company and to King ; a statement of the plaintiffs’ title as assignees ; and the amount of the debts due to the plaintiffs as such assignees, and the demand of payment thereof. And the statement and demand are, in our opinion, sufficiently particular. It has not been intimated that the statement nniv=t or untrue.

The objection most relied upon, as to this part of the case, was, that the statement and demand were not made in a reasonable time — being more than two years from the time when the attachments were made by the officer, during all of which interval of time, it is said, the officer could not know what to do with the property. Now the statement and demand should be made in a reasonable time. Johnson v. Sumner, (ante, 172). The mortgage, which was assigned to the plaintiffs, was made subject to the mortgage of Perry and others. If that had been confirmed, the plaintiffs would have included the amount which they would have been held to pay on that mortgage, in their claim as assignees of the second mortgage. The defendants knew of the suit which was pending between the prior mortgagees and the attaching officer, which, we have seen, was not decided until September, 1839. And the statement and demand were made upon the attaching officer immediately afterwards. There is no evidence which would justify an inference that the plaintiffs had any sinister views in withholding any information, or that they had any intent to take any course for the purpose of embarrassing the other party. Whitwood v. Kellogg, 6 Pick. 420. The plaintiffs could not know, until after the decision of the case touching the first mortgage, whether or not they might legally demand or claim of the attaching officer die money which was secured by the first mortgage. And it is not contended that the plaintiffs were guilty of any laches after that case was decided. We think that the objection made in. regard to the statement of the plaintiffs’ claim, and to the demand of payment cannot prevail, for the reasons before stated.

But the great point of the defence is, that the mortgage, which has been assigned to the plaintiffs, is void, inasmuch as the general assignment was expressly declared to be made subject to the mortgages which Turner & Baffin had before made, which included this mortgage as well as that which was given to Perry and others. The plaintiffs’ mortgage was executed on the same day on which the first mortgage and the general assignment were executed. The plaintiffs’ mortgage was said to be subject to the first mortgage : and it is strongly argued for the defendants. that the plaintiffs’ mortgage should he put upon the same ground as the first has been, and should be taken as part of the general assignment, and void, as against the statute of 1836, before cited. But the difference between the first and second mortgages consists in this, viz. that the first mortgagees were parties to the genera] assignment, and the second mortgagees were strangers to it. The Housatonic Manufacturing Company, by Whit-more their agent, and King, for himself, were proceeding against Turner & Laflin merely for. their own security and benefit. They were not in the counsels of the first mortgagees or of Turner & Laflin. They insisted upon security. Laflin engaged, upon his honor, that the security required should be given. An the case finds that the intent of Turner & Laflin to make the first mortgage was designedly kept from the knowledge of King, and from Whitmore who was agent of the Housatonic Manufacturing Company. They were imposed upon by Turner & Laflin, and obliged to take their mortgage subject to that which was given, without their knowledge, to Perry and others. The case also finds, that Laflin designedly kept from the knowledge of Whitmore and King his intention to make a general assignment ; and his attorney was also requested to keep the same secret. The assignment was executed one or two hours after the mortgages. King was not present when the assignment was executed. The mortgage to the Housatonic Manufacturing Company and to King was delivered to King, and he, in behalf of said company, went immediately for the purpose, and took possession of the property, before the writing of the assignment was completed. Any knowledge afterwards, which the company or King might have of the assignment, without participating in the arrangement, would not prejudice their claims under the mortgage.

It is found, indeed, that Perry gave the assignment to King, after it was executed, to procure Gershom Turner to sign it, and then to carry it to the register’s office to be recorded, but that there was no evidence that King read it, or that he was told what it was. Wells Laflin presumes that King knew what the paper contained, but no facts are stated by Laflin from which such presumption could be made. But if King did know the contents of the paper, there is not the least evidence that he assented to its provisions, or agreed to accept the mortgage to himself and to the Housatonic Manufacturing Company, as connected with or subject in any manner to the general assignment.

The case of Green v. Kemp, 13 Mass. 515, has been relied upon to show that as the plaintiffs took their mortgage subject to the prior mortgage, they cannot be permitted to deny its validity. The objection to the first mortgage, in the case cited was, that it was void for usury. The tenant had purchased the right of redemption. It was held that a mortgage on a usurious consideration was void only as against the mortgagor and those who may lawfully hold under him. But the mortgagor might waive that legal objection, and pay his debt, without availing himself of the defence of usury. As between those parties, the mortgage was voidable, and not merely void. It would be in the power of the mortgagor to give validity to his deed, usury notwithstanding. But in the case at bar, the mortgagors had no such election or power. They had given a preference, contrary to the statute, and they could not avoid or repeal the statute. The extent, to which the doctrine of estoppel would apply, would be, that if this were a case between the first mortgagees and the plaintiffs, then the plaintiffs could not be permitted to deny that there was a prior mortgage : They must be considered as assenting and agreeing to hold subject to all the claims which the first mortgagees might by law enforce by virtue of their first mortgage. But it could not be carried further. The second mortgagees could not be concluded from showing that the first mortgage had been paid, or that, by force of the statute, it was merely void, notwithstanding all the good will of the mortgagors to make it good, and so that the first mortgagees were not entitled to recover any thing. The plaintiffs could not be precluded from showing that the first mortgage was, without their knowledge, procurement or participation, connected with the general assignment, in such a manner as to render it a mere nullity. The plaintiffs do not claim under the first mortgagees, and the doctrine of estoppel, therefore., does not apply.

It has been contended that the plaintiffs should be affected with the constructive notice and assent, from the following facts, viz., that the attorney, who drew the mortgages and assignment, was a stockholder in the Lee Bank ; that Walter Lafiin was a stockholder and director in the same bank, and assisted in drawing the mortgages, and knew that the attorney was drawing the assignment; and that Wells Lafiin, at the time of making the mortgages and assignment, was the owner of a share in the Housatonic Manufacturing Company. But we think that the legal inference from these facts cannot control the fact, expressly stated in the case, that neither Whitmore, the general agent, nor King, had any knowledge that said assignment was in contemplation, until after it was executed and delivered. And the rights of the Housatonic Manufacturing Company and of King, under their mortgage, were before fixed and vested in them. Besides, the knowledge which an individual, who is a mere corporator, might have, is not to be considered as constructive notice to the corporation. The draft of the assignment remained in the pocket of the attorney until after King went out to take possession of the property.

Under these circumstances, we are clearly of opinion that there is not sufficient evidence to affect King or the Housatonic Manufacturing Company with a knowledge of or participation in the general assignment, so as to put them upon the same footing as Perry and others, the first mortgagees, have been placed. The latter were trustees and parties to the general assignment They were acting in concert with the insolvent debtors ; but the company and King, from the beginning to the end, acted adversely.

The plaintiffs claim to recover on the ground that their mortgage was a valid conveyance at common law ; and we think they have sustained their claim. There is not any evidence to show that Whitmore, agent of the Housatonic Manufacturing Company, and King, or either of them, had any knowledge of the general assignment until after the mortgage was delivered to them; and there is no evidence sufficient to prove that they ever assented to connect their mortgage with that assignment. And no lawyer will contend that the mortgagors could defeat their deed by a subsequent assignment with which the mortgagees had no concern.

It is the opinion of the court, that the plaintiffs are entitled to recover for all the property contained in their mortgage, in the same manner as they would have been if the mortgage to Perry and others had not been made ; and the cause is to be submitted to a jury to ascertain the damages, unless the parties agree to an auditor, or themselves agree upon the amount.