Waterman v. A. & W. Sprague Manufacturing Co.

12 A. 240, 55 Conn. 554, 1888 Conn. LEXIS 2

• Court: Supreme Court of Connecticut
• Decided: January 13, 1888
• Status: Published

Opinion

Pardee, J.

The plaintiff is a resident of the state of Rhode Island; he has never been a resident of this state. The A. & W. Sprague Manufacturing Company, the principal defendant, is a corporation chartered prior to 1873 by the legislature of the state of Rhode Island, having its legal location in that state. It has never been a corporation resident in this state. Chafee, trustee, the other defendant, is a resident of the state of Rhode Island.

The A. & W. Sprague Manufacturing Company made default of appearance ; Chaffee, trustee, appeared.

The following are among the facts reported in the finding :—

In the fall of 1873 the A. & W. Sprague Manufacturing Company was unable to meet its liabilities as they became due. It had assets consisting of mills, factories, stock and goods in Rhode Island and other states, which were estimated to be worth about fourteen millions of dollars, and it was in debt about eight millions of dollars, but it was unable to turn its property into money so as to meet its debts. Thereupon it called a meeting of its creditors, by public notice in the newspapers, to consider its condition and advise what course it had better take, which meeting was largely attended by its creditors, and among others by the plaintiff. At this meeting, after considerable discussion, it was unanimously decided that it was desirable for the interests of the creditors that a trust deed should be made by the company, and a committee was appointed to prepare a form of deed and report it to the meeting, with the names of proposed trustees. The committee on the same day reported to the meeting, recommending that a conveyance in trust, substantially like that hereinafter mentioned, be made by the company, and recommending the names of certain trustees. This report was unanimously accepted by the meeting, and the committee was further instructed to see that such conveyance was made. There was no evidence that Waterman, the plaintiff, took any part in the proceedings of the meeting. They caused the deed to be carefully examined by lawyers of ability, but the persons they wished to have as trustees refused to act. Thereupon the proposed deed was executed by the company and others, and the name of Zachariah Chafee, the defendant, was inserted as trustee, without any objection by the committee, and the deed was delivered and recorded in the land records of the town of Sprague in this state on the 2d day of December, 1873. On the 6th day of April, 1874, the company executed and delivered an assignment to more fully carry out the same object, which was recorded in the land records of that town, April 8th, 1874. Chafee, soon after the execution of the trust deed, took £>ossession of all the property of the company, including the land now in question in this state, and has ever since held and occupied the same, and managed and carried on the business in the Baltic Mill, in the town of Sprague, and the A. & W. Sprague Manufacturing Company thereupon ceased to actively carry on any business.

Creditors of the company to the amount of over eight millions of dollars took notes under the provisions of the trust deed, which included all the creditors of the company, except those holding claims to the amount of about one hundred and fifteen thousand dollars, of whom the plaintiff was one. Chafee, as trustee, sold large amounts of the property so conveyed to him, and paid large sums as interest and dividends on the notes. In the year 1876 a considerable portion Of the Baltic Mill property was swept away bjr a flood,- and Chafee expended of the trust funds a sum exceeding $250,000 in the restoration of the property and repairs upon the same rendered necessary by the flood. Without this expenditure the property could not be used, but by it it was made as valuable as before the injury, and Chafee has received the rents and profits thereof from the time of his acceptance of the trust, in 1873, to the present time. At the time of this expenditure the plaintiff was residing in the state of Rhode Island, and there was no evidence that he knew that these repairs were made.

The plaintiff knew of the execution and delivery of the trust deed to Chafee, in December, 1873, and never objected to the same in any way, .nor to the carrying out of the scheme, until he brought suit in this state and attached the property in question, in May, 1883. He did not come in under the deed and accept notes as therein provided, because Amasa Sprague, then treasurer of the company, promised him that lie would pay his claim, and advised the plaintiff not to take the trust notes for that reason. The plaintiff never received any of the notes nor agreed to receive the same, nor has he ever received any moneys as interest or dividend from Cliafee, or offered to release or extend his claim under the provisions of the deed or the assignment. These provided for the extension of claims for the period of three years, with interest.

On the 22d day of April, 1882, the plaintiff, then and still of East Greenwich in the state of Rhode Island, brought a suit against the A. & W. Sprague Manufacturing Company, in the Supreme Court of that state, for work and labor done by him for the company from November 11, 1862, to November 11, 1873, and by the consideration of that court recovered judgment in the suit against the company for 112,209.57, on the 18th day of December, 1882. The defendant Chafee applied to the court to be allowed to appear in the cause, and to set up and prove that at the time the suit was brought it was barred by the statute of limitations, but the court refused to allow him so to appear in the manner and for the reasons stated in the report of the cause in the Rhode Island Reports.

The plaintiff brought an action on the judgment to the Superior Court in New London county by process of attachment, bearing date May 3d, 1883, and returnable on the second Tuesday of September, 1883, the judgment being the sole ground of action therein, and by virtue of the process caused to be attached as the property of the company, on the 3d and 5th days of May, 1883, the several parcels of real estate, situated in the town of Sprague, in New London county, and in the town of Windham, in Windham county, which are described in the plaintiff’s complaint. The process and complaint were duly served and returned and entered upon the docket of the court at its September term, 1883, and by continuance came to the term held at Norwich on the first Tuesday of November, 1883, when the plaintiff recovered judgment against the company for the sum of 110,925.70—a part of the original judgment having been paid.

On the 14th day of February, 1884, this judgment being then unsatisfied, the plaintiff caused to be filed and recorded in the town clerk’s office of the town of Sprague, and on the 18th day of February, in the town clerk’s office of the town of Windham, a certificate in the form provided by statute, signed by the plaintiff’s attorney, Allen Tenny, and thereby placed a judgment lien in favor of the plaintiff upon the several parcels of real estate attached to secure the amount of the judgment and the lawful interest thereon.

Chafee, trustee, makes the following among other averments by way of answer :—

That the judgment rendered in the Superior Court in New London county is void and of no effect against this defendant, because the same was rendered in a suit upon a certain judgment, theretofore rendered in the state of Rhode Island, in favor of said Waterman and against the A. & W. Sprague Manufacturing Company, upon a claim which accrued more than six years before the bringing the suit in which the judgment was rendered, and which by the laws of the state of Rhode Island was outlawed and invalidated, so that no suit could legally be maintained upon it; that this defendant was not made a party to the suit, and therefore was not able to set up that defense thereto; that he applied to the court in which said suit was pending for permission to be made a party thereto, and to make such defense, but his application was opposed by the plaintiff and denied by the court, upon the sole ground that the judgment would not be binding upon him, but that he would have the right in any proceeding against him founded upon the judgment to take advantage of the claim and make the defense mentioned, and to defend in such proceeding in the same manner as he desired to do in the original action; and that the A. & W. Sprague Manufacturing Company neglected and refused to set up that defense, or any defense in the suit. And this defendant says that thereby the judgment in Rhode Island, and the judgment in this state upon •which, this proceeding is founded, are both illegal and void as against this defendant, and the attachment in said suit and judgment lien filed therein are as to this defendant illegal, null and void. And this defendant avers that all the creditors of said corporation, except creditors to the amount of about one hundred and fifteen thousand dollars, to wit: creditors holding claims to the amount of eight millions of dollars, accepted notes issued under the trust deed and assignment, and approved of and acquiesced in the same, and, acting for them as such trustee, this defendant has ever since managed the property so conveyed, and expended large sums of money thereon, and especially in the year 1876 this defendant expended of the moneys so received by him as trustee, the sum of two hundred and fifty thousand dollars in repairing the dam and buildings of the property now in question, which had been injured and carried away by a flood, and which it was necessary to expend to make the property' of value and to keep it in operation. All which proceedings were well known to the plaintiff, and Avere acquiesced in and approved of by him; and no action Avas taken by him to set aside the trust deed and assignment until the date of this complaint. And by reason of the premises the plaintiff is estopped in equity and good faith from noAV setting up and claiming that the trust deed and assignment are void as against him by reason of any provisions in the same and for the reasons alleged in his complaint. And this defendant avers that by reason of the laches and delay of the plaintiff in taking any proceedings in attacking the trust deed, and allowing this defendant in good faith to expend so large sums of money upon the property now in question, he is in equity and good faith barred from now attacking the trust deed; and at any rate the sums of trust money so expended upon the property by this defendant, with interest thereon, should be first repaid to the defendant out of the avails of the property before the plaintiff should have a decree to foreclose the same as prayed for by him.

These averments are to the effect that the plaintiff is barred from the relief which he seeks because he actually consented to the possession of the property by the trustee under the deeds ; that he constructively assented; that his claim has passed under the statute of limitations; and that laches is to be imputed to him. We think that neither of these objections is well taken.

The plaintiff has neither in fact nor in law assented to the execution and delivery of either the mortgage or deed of assignment to Chafee, trustee, or to the subsequent appropriation by him of the property by use and sale. The presence of the plaintiff at the meeting of the creditors has, under the circumstances, no legal significance. His debtor invited him and all its other creditors to a meeting to listen to a statement as to its financial condition and a proposition for a postponement of their right to enforce their claims. He attended, listened and went away, without speech or vote or other act. This he could do without putting in peril any right either as between himself and his debtor or between himself and any other creditor. Moreover, all of the creditors who are now represented by Chafee adopted measures, designed for the purpose of preventing the question of assent or non-assent by the plaintiff from resting upon his silence, or speech or vote or other act at that' meeting or at any subsequent time, other than upon one specified act, required of him prior to a fixed date; performance or non-performance equally certain to be known to them. He was required to agree on or before the expiration of nine months from a specified date, to postpone for the period of three years his right to enforce his claim and accept from their agent, the trustee, the notes of the debtor, upon that time, with interest. They then notified him that unless he should on or before that day extend his credit in the manner and for the time named by them he would be barred from all right to or interest in the property which the debtor proposed to convey to a trustee for their benefit.

The proposition of necessity implied that they would give him nine months for consideration and determination; it, bars out the idea that he was to be held to have irrevocably fixed liis condition iu the matter by his silence at the meeting. They expressly conceded to him a period of subsequent probation during which he had their permission to repent of his silence and inaction and become an assenting and participating creditor with themselves. At the expiration of the time for deliberation they knew that he liad not fulfilled the requirement made of him by them ; that he had not assented. Thus they put upon him the stamp of non-assent which he has not since effaced. In view of this it is not for them to ask a court to presume that they believed he had assented.

Neither is the fact that Amasa Sprague’s promise led him to refrain from the acceptance of the time notes of any significance in this matter. Previous to the expiration of the time for consideration and decision he had two possibilities of payment, one by Amasa Sprague, the other by the trustee. The fact that he regarded the first as worth pursuing is not to be made the basis of an assumption that he intended to throw away the other. Presumably a creditor retains and exhausts all possibilities and abandons none until payment. Soon after the execution of the deed the creditors took into, their possession and use the entire estate of the debtor, valued at about fourteen millions of dollars, and since that time have sold a portion thereof and used the remainder, taking to themselves the proceeds of sales and profits of use to the total exclusion of the plaintiff. It would be a violent presumption indeed that he assented without any consideration whatever to their exclusive appropriation of this estate simply because he was testing another possibility. By the law of Rhode Island, the state of residence of all parties to this record, both the mortgage deed of 1873 and the assignment of 1874 are valid and effective instruments for the conveyance of property therein described to the defendant Chafee, trustee. He has a title to property in that jurisdiction beyond impeachment by any creditor. This fact was known to and acted upon by all. Action by the trustee, action and omission to act on the part of the plaintiff, are alike to be interpreted in the light of this knowledge. The former held, used and sold the property as owner by a title unassailable by the latter; held it in spite of him, and not at all by any presumed assent or permission on his part. The plaintiff knew himself to be powerless to act; he refrained from any effort to appropriate the property to his own debt because he thought that to be impossible; his assent is that only which comes from silence and inaction when he was unable either to dispute or act. After the execution of the deeds there was neither necessity nor place for either the trustee or the plaintiff to consider, even, the question whether the latter had or had not assented, would or would not assent. The only open question was, would he waive present payment and share in the results of the management of the trustee, or would he retain his right to enforce immediate pajnnent whenever and where-ever he could find his debtor’s property? The fact that he tested the latter possibility lays no foundation for the presumption that he assented to the appropriation of the entire estate of his debtor by other creditors, being powerless to prevent such action. The law does not presume assent as against him because of his omission to attempt the impossible; because of his omission to attempt to deprive those creditors of rights lawfully exercised by them. From the day of execution of the deeds he was ignorant, without fault on his part, of the fact that any right in or t'o any property of his debtor remained to him, which he could put in peril by his omission to act, or defend and save by action. For the reason that he sat still under such circumstances, he did not necessarily, as a matter of law, assent.

Courts of equity do not impute laches by an iron rule. Circumstances are allowed to govern every case. The fundamental and only just reason why this plaintiff should be postponed to a grantee under a fraudulent and avoidable deed is that the delay of the former in enforcing his claim against the property has induced the latter to subject himself to some form of peril of law, or come under some diffb culty in protecting his rights, or to assume some burden, let go some advantage, or part with some right or thing of value; in short, to be where he otherwise would not have been. Now there is no finding, no evidence, no averment even by the trustee, that he has suffered or done either of these things; none that he has been influenced in the slightest degree by any act or omission on the part of the plaintiff. Indeed, upon the facts, an assumption that he had been would be quite unwarrantable. The assenting creditors represented eight millions of dollars; they took from the possession of their debtor property of the estimated value of fourteen millions; they proceeded at their pleasure to sell and retain the proceeds; to use, and consume in the use the remainder, and retain the profits. The non-assenting creditors represented about $115,000. It would be an affront to the common sense and business sagacity of the assenting creditors to presume that they would have abandoned the practical ownership of fourteen millions of property or would have paused for an instant in their plan to appropriate it to their best advantage, even if they had possessed positive knowledge that they would be compelled to advance the amount of these non-assenting debts to protect themselves in the possession of the vast remainder; and the finding is, as might be expected, that soon after the execution of the deed, without waiting to know whether the plaintiff would accept the terms which they had imposed upon him, their agent, the trustee, took possession of the entire estate.

In 1876 the trustee expended more than a quarter of a million of dollars in reparation of injuries by a flood to the mill property in Sprague in this state, the subject of this controversy. But, as before, there is neither finding of fact nor averment, nor warrant for the supposition, that in making this provident expenditure he was controlled in the slightest degree by any consideration of the plaintiff’s assent or non-assent. Regardless of him and of his position in reference to it, an irresistible compulsion was upon him as the guardian of a vast property in the interest of persons who were either to reap large profits from its use or sale if the mill should be restored, or to bear large losses if it should be left in a state of decaying idleness. He made the expenditure; they have had several years use of the mill; they have not alleged that the expenditure has not been repaid b}'- use.

Statutes of limitation are no part of a contract; they concern only the form and time of the remedy for a breach thereof. They are local; of force only within the state which enacts them. This court does not enforce foreign statutes of that description. Our statute provides that no action on simple contract shall be brought but within six years after maturity; but in computing such period, the time during which the party against whom there may be any such cause of action shall be without this state shall be excluded. A resident of another state who is sued upon his first entry into this state is within the scope of this exception equally with a former resident here, subsequently residing in another state and returning to residence here. Under this statute resident and non-resident creditors and debtors stand upon the same footing. Under it every creditor resident or non-resident is entitled to the full period of six years in this state in which to institute an action upon a simple contract, making such service upon the debtor as will support a personal judgment, a judgment which will conclusively determine the issue between the creditor and the debtor and hind both in every jurisdiction. The fact that, during the whole time of such debtor’s being so without this state that no service of process can be made upon him which will support such personal judgment, he held real estate here open to attachment by, and of sufficient value to pay the claim of the creditor, is of no legal significance. Under the statute the presence of such real estate is neither a legal nor sufficient substitute for such residence of the debtor as will enable the creditor to obtain such personal judgment. Of course the creditor at any time, while the debtor is so without the state, can institute his action, and appropriate such property of the debtor as may here be found, to the extinguishment of the debt; but this will be only in the nature of a proceeding in rem, binding upon the property, but not sustaining a judgment binding upon the person of the debtor in every jurisdiction. Sage v. Hawley, 16 Conn., 106; Hatch v. Spofford, 24 id., 432.

The title of the defendant Chafee, trustee, rests upon the validity of the mortgage deed of November, 1878, and of the deed of assignment of April, 1874, from the Sprague Manufacturing Company to him. This court in DeWolf v. The A. & W. Sprague Manufacturing Company, 49 Conn., 282, determined that both of these deeds are fraudulent and void as against non-assenting creditors. Of these is the plaintiff. Therefore from 1873 to this present there has been in this state real estate the title to which, as between Chafee, trustee, and the plaintiff, has been in the A. & W. Sprague Manufacturing Company. Yet, during this time the company has been continuously non-resident and beyond the reach of such process within, this state as will support a personal judgment binding upon it in every jurisdiction. Therefore neither it nor Chafee, trustee, can invoke the aid of our statute of limitations in an effort to prevent the plaintiff from appropriating this real estate to the payment of his debt. Neither can either of them here plead in bar the statute of limitations of the state of Rhode Island, for the reason already given.

In form this is a petition for the foreclosure of a lien or statutory mortgage upon real estate as 'the property of the A. & W. Sprague Manufacturing Company. The lien exists by virtue of the judgment in this state in favor of the plaintiff against that company; this judgment in turn rests upon one rendered in the state of Rhode Island ; and this last upon a debt due from it to the plaintiff. There was no legal necessity for the judgment in Rhode Island, and it would have availed Chafee nothing if he had been permitted to appear in that suit and plead the statute of limitations of that state; nothing if he had driven the plaintiff out of that court. The latter could still have sent his claim in its original form into this state and thereon ordered suit, attachment and appropriation of the real estate by levy of execution, if he had desired so to do.

This unnecessary change of form of claim without change of substance neither works hurt to the plaintiff nor brings help to the defendant. It cannot be made the occasion for driving the former out of court, in reality he is appropriating the property of his debtor to the satisfaction of a judgment at law based upon a debt, the validity and justice of which both defendants admit.

The law of this state is, that as against the plaintiff both of those deeds were fraudulent and void and conveyed no title to the real estate here. Knowledge of the law of his state of residence is to be imputed to him, but not knowledge of the law of a foreign state. Upon the record, after the promulgation of the law of this state by this court he speedily instituted proceedings for the appropriation of the real estate in this state, not effectually conveyed to Chafee, trustee. There was no laches on his part after knowledge of his rights, and no laches in obtaining such knowledge. He had the right to presume that the law of this is- as the law of his own state. He was under no obligation to assume the burden of a suit for the purpose of learning whether it is so or not.

The plaintiff was not compelled to ask the aid of the equitable powers of the court. Upon the record he had a judgment at law, upon which he was entitled to an execution, in satisfaction of which the real estate attached in the suit might have" been set out to him. He had also means of satisfaction by lien and foreclosure on the equitable side of the court, assuming the judgment to be of such a character as to come within the statute as to judgment liens, as to which no question is made in the case. With this right at the time to apply the property to his debt by proceedings at law, his delay in instituting those proceedings is not laches. Laches is not to be imputed to a suitor'in a court of law who has not brought himself within the statute of limitations. If there had been no laches up to that point, and he had then the right to resort to a judgment lien and a foreclosure, he is not affected by any imputed laches in a court of equity.

The Superior Court is advised to render judgment for the plaintiff.

In this opinion Park, C. J., and Beardsley, J., concurred; Carpenter and Loomis, Js., dissented.