George v. Woodward

The opinion of the court was delivered by

Wilson, J.

The first question in the case, relates to the terms of the contract upon which the notes, mortgages and bill of sale were assigned and transferred to the defendant Foster. It is claimed by the petitioners that by the assignment and transfer of the five notes and mortgages to Foster, he acquired an interest in the mortgaged premises in common with Bugbee and George who own the other three notes, in such proportion as the amounts of their respective demands bear each to the other; that Foster, by the assignment of the bill of sale and his custody of it, became obligated to exorcise ordinary diligence in respect to the personal property, and that he should account for the same, on the notes to secure which the bill of sale was executed. The defendant Foster claims that it was mutually agreed between him and Bugbee, that Foster should have the first lien upon the mortgaged premises; that the premises should be holden first for the payment of the notes transferred to him ; that-they so represented the trade to Averill by whom the writings were drawn, and that Foster supposed the writings were made according to the agreement of the parties, as set forth in his answer and cross bill. It is further alleged by Foster that he took the bill of sale under an agreement that if he received any of the personal property, or its proceeds, he would account for the same, but that he was not obligated to look after the property, nor accountable for it except as above stated. The answer of Asa George admits that prior to and at the time of the assignment, he held the notes as collateral security for the payment of the note against Bugbee. George admits that Bugbee was authorized to trade with Foster, and let him have the notes ; George was not present when the trade was negotiated, and does not claim to have any personal knowledge of the terms of the agreement, but he denies that Bugbee was authorized to give Foster a priority of lien. The answer of Bugbee denies Foster’s statement of the terms of the contract, and claims that the contract, reduced to writing, is in accordance with the agreement and understanding of the parties. The testimony of Foster is direct and positive, and it tends to prove his statement of the contract, and the circumstances under which it was made. It appears from his testimony that his information, as to the value of the farm on which the notes were secured, was obtained just before the trade was closed, when he was informed by one residing in the vicinity of the farm, that it was worth about $600.; and it appears that Foster understood at the time the trade was closed that the security was good for the amount of the notes transferred to him, but that the premises were not sufficient iu value to secure the payment of all the notes embraced in the mortgages mentioned in said petition. This being the understanding of Foster, as to tlie value of the mortgaged premises at that time, and it appearing that he did not rely very much, if at all, on the personal property, it is not very likely that he undei’standingly entered into a contract by the terms of which he would be liable to lose one half the amount of the notes taken by him for the mill property. The testimony of Sarah M. Bennett tends to prove the agreement insisted on by the orator Foster. Mr. Averill swears that Foster and Bugbee talked over the trade in his presence at the time the writings were made. This witness says he understood from Foster and Bugbee that the $600. that Foster had, was to be the first secured on the farm.” It is insisted by Bugbee, in and by his answer, that if Foster supposed the five notes transferred to him were a prior lien on the farm, it must have been an inference from the fact of their first becoming due, and not from any agreement of the parties. But the evidence tends to show that Foster undertook, by express contract, to secure a priority of lien, and that he did not rest his claim for such priority on the mere fact that the mortgage notes, to be transferred to him, were the first that would become due. Sarah M. Bennett testified that she understood from Foster and Bngbee that if the $600. which Foster held was not paid, he was to have the farm. Foster testified, among other things, as follows : “ I stated the trade over to Mr. Averill and asked Bugbee if that was the trade, and he said it was. The trade was that he was to give me the first notes due, secured by the "Woodward mortgages, amounting to six hundred dollars, besides the interest. The interest on them at that time amounted to about $15. It was expressly said there that I was to have the first six hundred dollars due on the mortgages, or that I should have the farm. Bugbee said I need not flatter myself that I should get the farm for $600., when he sold it for $1100. and had the $500. that come on after that, that he should take care that the payments were made to me when my notes become due.” The testimony of Averill tends to show that Foster and Bugbee understood at the time the assignments were made that, by the terms of their trade, Bugbee could derive no benefit from the mortgages by way of security for the $500. in notes retained by him, unless the notes transferred to Foster were paid in full.

The evidence, we think, leaves no doubt that it was agreed by and between Foster and Bugbee that Foster should have a priority of lien on the mortgaged premises to secure the payment of the $600. specified in the five promissory notes transferred to him, and we think it was fully understood by them that Averill should make such writings as would give Foster a lien paramount to that of Bugbee and George. It does not appear that Foster read the mortgages or that he heard them read. The evidence as to whether the assignments were read to Foster, is not very satisfactory, but however the fact may be, it is clear that Foster relied upon Averill to examine the mortgages, and to write such assignments of them as would secure to Foster the full benefit of the mortgaged premises according to the terms of their agreement. The mistake complained of consists principally in the omission of Averill to insert in the assignments a stipulation that Foster should have a priority of lien, an omission which did not at the time attract his notice, as he was relying upon Averill to insert such provisions as would express the agreement and intention of the parties as declared by them at the time the assignments were made. It is said by the petitioners’ counsel that Bugbee was not authorized as the agent of George to make the agreement insisted on by Foster. It appears that Bugbee was not the mere agent of George in making the trade, but he was and still is the general owner of the notes claimed by George. George only holds them as collateral security for his debt against Bugbee, who had the same interest in those he transferred to Foster. Bugbee, in making the trade, acted for himself and with reference to his own interest as the general owner of the notes ; he also acted as the agent of George, so far as to protect and keep good the collateral security of George, which was the extent of his interest in, or claim on the notes, as against either Bugbee or Foster. But it is established by the evidence that the property deeded by Foster to George is of value equal to the amount of the notes transferred to Foster. George accepted that conveyance, he took and holds the premises so conveyed, as security in lieu of the notes transferred to Foster, so that George’s security was not diminished by the trade. We are of opinion, under the circumstances of the case, that Foster holds a priority of lien as against both Bugbee and George.

2. As to the hill of sale, it appears that Foster accepted the delivery of it, under an agreement, by the terms of which he was wholly relieved from the care of the personal property, and not accountable except for such of it as he should receive. By the terms of that agreement Bugbee undertook to look after the personal property, and to see that the avails of it were applied according to the terms of the bill of sale, if Woodward failed to pay the notes according to their tenor. By that arrangement it became the duty of Bugbee to require Woodward to keep the property according to his agreement, and when he failed to pay the first note, Bugbee should have taken the necessary measures to dispose of the property, for the purposes for which it was pledged. There is no evidence in the case tending to show that Foster did anything to prevent the property from being disposed of as provided by the bill of sale ; but it does appear that Bugbee wholly neglected his duty in that behalf, and, we think, the consequences of his neglect should not be borne by Foster.

8. It does not appear that any exceptions were taken to the master’s report. The testimony taken by the master, upon which his finding is based, is not before us, we can, therefore, review only such questions as appear upon the face of the report. Upon the facts found by him we see no objection to the manner in which the account is taken.

The decree of the Chancellor is affirmed, and the cause is remanded to the Court of Chancery to be disposed of accordingly.

Case Details

Case Name: George v. Woodward

Court Name: Supreme Court of Vermont

Date Published: Aug 15, 1868

Citation: 40 Vt. 672

Court Abbreviation: Vt.