52 Conn. 330 | Conn. | 1885
Lead Opinion
When this case was before us on a demurrer it appeared that the Franklin Institution for Savings was a non-assenting creditor. It now appears that on the 15th daj- of April, 1874, the treasurer of that institution, being authorized so to do by a vote of-the board of trustees, and also by a vote of the standing committee, received from Chafee, the trustee, the new notes of the A. & W. Sprague Manufacturing Company for the full amount of their claims as collateral thereto, pursuant to the votes and upon the terms expressed in the trust deed. The institution then and thereby assented to the deed, unless such action was illegal for some of the reasons urged by the plaintiff’s counsel.
The first is that the votes of the trustees and of the standing committee authorizing such assent were illegal, for the reason that the board of trustees and the standing committee were not legally constituted.
It is hardly necessary to examine the proceedings with a view to ascertain whether they are technically legal or not, because the proceedings clearly show that the trustees and the standing committee were in fact the only persons who could, act, or who pretended to act, for the institution. They were clearly officers de facto, and their acts were binding upon the institution so far as other parties are concerned. Upon this point we entertain no doubt.
The objection to the application of this principle on the ground that the extension of credit was without consideration, is not well founded. It was not a mere naked extension. By it the institution was brought within the terms of the mortgage deed and was in a condition to participate in the security. That of itself is a sufficient consideration.
But a valuable consideration is not necessary. The acceptance of the trust deed by the savings bank presumably influenced the other creditors to accept it. So far as any considerable number of creditors refused to accept the deed and thus placed themselves in a position of hostility to it and became interested in setting it aside, it would constitute a serious objection to the acceptance of the deed
But various reasons are urged why the assent should not operate to prevent the plaintiff from impeaching the deed to which the corporation was a party.
1. It is objected that the trustees had no power or authority to do what they assumed and undertook to do in the then condition of the bank; that the institution was a mere naked trustee for the depositors, having no beneficial interest in the property; that the depositors were the creditors of the corporation and cestuis que-trust; that the corporation was in fact insolvent; that the conveyance of the Sprague property to Chafee was a scheme to postpone creditors; and that under the circumstances an assent to it by the corporation was in violation of the trust.
On the assumption that the Sprague notes and acceptances could not be collected, the corporation was in fact insolvent. But they were then supposed to be collectible inside a period of three years ; that the corporation would continue its business and be able to pay dividends; that at most the embarrassment was temporary; and that they would ultimately be able to pay all the depositors in full.
In that condition of things it was undoubtedly the duty of the trustees, in the exercise of a sound discretion, to do all that could be done to protect the interests of the depositors. Acting upon the light they had, they deemed it best to accept the provisions of the trust deed, and avail themselves of such payments as the trustee might be able to make. They may have misjudged, their action may have been unwise, but we cannot say that it was a gross breach
It is to be considered that, though the institution was embarrassed and had suspended payment, and its condition had been made the subject of an investigation and report by a committee appointed by the governor of the state, yet the trustees were the sole persons who represented the institution and had any power to act. A receiver had not yet been appointed. The whole responsibility as well as power rested with them. The condition of the bank had no effect upon their rights and duties beyond its presenting a reason for cautious and well-considered action. The question before the trustees was wholly a prudential one, and not at all one of power.
2. But it is said that the receiver, who represents the depositors, may repudiate the action of the trustees, and that their assent is not binding on him.
The receiver for most purposes represents and stands in the place of the corporation, and can enforce only such contracts and rights as it could enforce. But when acts have been done by the corporation in violation of law and in fraud of the creditors, the receiver, who for all beneficial interests connected with the trust is regarded as the representative of the creditors, may repudiate their acts, taking care, however, that third parties who are without fault do not suffer. Such cases, however, are exceptions to a general rule, and it should clearly appear that the case is within the
Upon- the question whether the trustees were assenting to a fraudulent deed, there is this further to be said. The Supreme Court of Rhode Island has since holden that the deed was not fraudulent, but valid. If it was so when the court so decided, it was so when the trustees accepted it. There can therefore be no invalidity in their action on the ground that they were accepting a fraudulent deed.
But it is said that the deed is fraudulent under Connecticut law, and so of no validity to carry real estate here. If that be so, it does' not affect the question we are considering, which is the validity of the action of the trustees in accepting the deed. The transaction being in the state of Rhode Island, where all parties resided, from whose laws the trustees received their power, and to -whose laws they were responsible, the sole question for them to consider was the validity of the deed there, and not its validity in every other state where there might be property of the mortgagors that the deed assumed to convey.
In Connecticut the question can be raised -of the sufficiency of the deed to carry the title to land here; but whatever question is thus raised stands wholly outside of and unaffected by any question as to the validity of the action of the trustees in accepting the deed. That question is governed by the laws of Rhode Island, and does not sway from one. side to the other with the differing laws of the different states where portions of the property mortgaged may happen to be situated.
4. The plaintiff also says:—“ The trustees assented to give time according to the terms of the trust deed and notes,• that is to say, they assented to what appeared on the face of the papers, and to that only. It appears from the finding of facts in the case that the deeds were merely a part of a fraudulent scheme between Chafee and the Spragues, designed not merely to carry out the provisions of the trust deed, but also to preserve the property in their possession, control and use, until they should be able to pay their creditors in full and have a surplus left for themselves.”
The authorities cited in support of this proposition are cases where there "was actual fraud, and the party claimed to be estopped was ignorant of the facts constituting the fraud. In this case the finding of fraud is in the following language:—“The said A. & W. Sprague Manufacturing Company executed the said trust mortgage deed with the intent and design to hinder and delay their creditors in the collection of their claims, by placing their property beyond the reach of ordinary civil process, and with the view of preserving said property in their control, possession and use, preventing shrinkage and loss, and continuing their manufacturing business by. and through the said Chafee, as trustee, until they should be able to pay their creditors in full and have left a surplus for themselves. And the said Chafee well understood that such were the intention, design and views of the said company at the time he accepted the trusts created by said deed.” And the same finding is applied to the assignment. How it is obvious that the fraud consisted in postponing creditors, by placing the property beyond the reach of civil process, and for the purpose of
The real character of the transaction was apparent on the face of the papers. There were no extrinsic facts bearing upon the question of fraud except such as were apparent and known by all concerned. There was no attempt to deceive or mislead the trustees, and there is no pretense that they were in fact deceived or misled. In the cases referred to it seems to have been otherwise; there were facts of a fraudulent character of which the parties were ignorant. But the trustees knew that the acceptance of the deeds involved delay, but they, and all the other assenting creditors, doubtless believed that it would be better for them in the end.
The finding of fraud is evidently a legal conclusion, mainly from the fact that the deeds were calculated to hinder and delay creditors, and that only as to non-assenting creditors. Manifestly there is no fraud affecting the assenting creditors. As to them the transaction was open handed, no fact or circumstance of a fraudulent nature being concealed or withheld from them. Characterizing it as a “fraudulent scheme” does not change the nature of the real facts. The Supreme Court of Rhode Island, as we have before remarked, does not pronounce the transaction even legally fraudulent. How can it be said that a different view entertained by the courts of this state relieves the plaintiff of the consequences of the assent? We fail to see anything in this objection that destroys the force of the assent.
5. Again, the plaintiff says :—“ Assent to an assignment is coupled with the implied condition that other creditors shall agree. The hands of one creditor cannot be tied by acquiescence, while all the rest are léft at liberty to prosecute their legal rights.”
This principle applies when the object is.a composition
A similar claim is made in another part of the brief, which we will notice in this connection. The counsel say: —“ If by reason of the dissent of any creditor the trusts can be broken or the estate trenched upon, so that those who assent cannot get the benefit of the whole estate according to the deeds, then one who has assented is equitably entitled to be absolved of the assent he gave, and to treat his assent as null and void.” If this is so it practically obliterates in all cases the distinction between assenting and non-assenting creditors. But it cannot be so in a case like this, where the conveyance is in terms for the exclusive benefit of those who assent. What will be the consequences if a non-assenting creditor succeeds in setting aside this conveyance is a question we will not anticipate.
6. The proposition that the plaintiff is absolved from all obligation growing out of the assent, by the non-payment of the notes within three years, is not sound. In ordinary cases it is doubtless true that if a creditor gives time, and the debt is not paid within the extension, suit may be brought. But where an extension is accompanied by an extension by nearly all the other creditors, and, as a part of the transaction, all the debtor’s property is placed in the hands of a trustee for the benefit of such creditors, then, if the debts are not paid, while each creditor may perhaps sue and have a judgment against the debtor, yet he will not be permitted to attach the trust property and thereby have an advantage over the other creditors. He has cast in his lot with them, and must with them abide the result.
7. The plaintiff further says:—“ If without consideration the creditor says the transfer may stand, and the grantor does not act upon the statement in a manner different from what he would otherwise have done, or, if the circumstances
The principle involved in this discussion is not the ordinary doctrine of estoppel; it has a broader significance. It is not merely the question whether a party is to be estopped from denying or proving a thing because he has by his conduct misled another, but it is whether a party who has derived a benefit from his act may afterwards repudiate it and thereby escape any unpleasant consequences. The corporation did receive quite a sum of money from the trust fund as the direct result of their assent to the deed. .Now when that assent stands in the way of the receiver’s collecting the whole demand from another portion of the trust-property, he can hardly expect to be permitted to repudiate the assent on the ground that the debtor had not been misled or prejudiced-. The question does not so much concern the grantors as it does the large number of creditors. Moreover there is a principle of public policy involved that a party will not be permitted to impeach, for fraud, a deed to which he has voluntarily and knowingly become a party.
Our conclusion, therefore, is that not only the corporation but the receiver, is bound by the assent to the deed.
The plaintiff’s counsel suggest, rather than seriously argue, that the bank assented to the deed but did not assent to the assignment; and that the-plaintiff is how at liberty to impeach the latter and set it aside for fraud. If that is so, still the deed must stand and the plaintiff can only avail himself of the equity of redemption. We cannot see that that will be of any practical value to him.
But his position is hardly tenable. The mortgage deed was executed in November, 1873. On the 6th day of April, 1874-, the mortgagors assigned or released to the mortgagee the equity of redemption, which carried with it, of course, the right which was expressly reserved in the mortgage deed to “ the possession and use of said granted premises.”
The two conveyances vested the whole title in the trustee. The mortgage deed, however, was the principal thing;
After these two conveyances were made the trustees of the bank voted, “that the standing committee be authorized to exchange the Spragues’ liabilities for the new notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, on the terms proposed in the trust deed to Z. Chafee.” The standing committee authorized the.treasurer to receive the new mortgage notes, and he did so on the terms and conditions contained in the mortgage deed. But there is nothing in the transaction expressly limiting its effect to that deed. The assignment, so far as it had any effect at-all, was beneficial to. the trust estate.
In accepting an interest in the trust • estate, in its then condition, we must presume that the bank intended to accept it as it was. ' There is no room for an assumption that it intended to accept the mortgage and repudiate the release of the equity of redemption. The trust estate was one entire thing; and the bank accepted it in its entirety. In doing so, it necessarily assented to the assignment as well as the mortgage.
We assent to the proposition that there can be no presumption in aid of a deed which the statute prohibits, or which the law for any cause must pronounce void. But a distinction is to be observed in this regard between deeds which are void and deeds which are voidable merely. No presumption will give effect to the former, while it may to the latter. This assignment at most was voidable only. No statute of Rhode Island prohibits it, and the law of that state does not declare it void.; indeed, it is questionable whether in that state it can be regarded as voidable even. But assuming that it can, we see no reason why the ordinary presumption that an acceptance will be presumed when a deed is beneficial to the grantee, does not apply. It is hardly necessary, however, to resort to presumptions, for, as we interpret the votes of the trustees and the standing committee and the action of the treasurer, they amount to an intentional actual acceptance of the assignment.
In another part of the brief and for another purpose, the plaintiff’s counsel say that the savings bank accepted the trust deed in the belief that it conveyed to the trustee the Connecticut property. We have no doubt that this is true, and that every other creditor accepted it in the same belief. That the grantors intended to convey that property, and that the trustee supposed that it was conveyed, there can be no manner of doubt. In that respect this case is distinguishable from the case of Herman v. Deming, 44 Conn., 124. In that case the land in question was a wood lot which belonged to the wife of one of the parties who had signed the mortgage deed with her husband for the purpose of creating a lien on another piece of property which she owned and which was particularly described, and which, it may be presumed the contract between the parties called for. But there was no evidence that the wood lot was in the minds of the parties, or regarded as at all material or intended to be embraced in the mortgage, except the fact that after describing several pieces of land belonging to the different grantors, the mortgage deed contains these words :—“ Also all such other lands as we the grantors, or either of us, own or have any interest in, situate in said town of Canaan; reference being at all times had to the land records of said Canaan and to the probate records for the district of Sharon for more particular description of the same.”
The present case more nearly resembles the case of Cake v. Peet, 49 Conn., 501, where it was shown, aliunde, that the parties intended by such general words to embrace an ore-bed,” which was not described, but which was taken possession of and held by the grantee. In that case the deed was reformed so as to carry into effect the intention of the
Pursuant to the authority so conferred the trustee took possession of the property in question, and the same having been extensively damaged by a flood, expended in permanent repairs thereon of the trust money in his hands the sum of $250,000. We remark in passing, that if the plaintiff can now take this property from the trustee, on the ground that it was never conveyed to him, the other creditors must lose not only all right to participate in the property itself or its avails, but must also, for aught we can see, lose all their interest in the large amount of the trust money thus expended. And what they thus lose the plaintiff gains, inequitably as we think.
But to return. The contract provides:—“And it shall
All this, the party represented by the plaintiff, for a valuable consideration, agreed to in respect to every part and parcel of the property named in the trust deed. Notwithstanding said agreement, but in plain and palpable violalation of it, the plaintiff now seeks to withdraw from the operation of said trust a portion of said property to the value of $1,000,000, more or less, and to appropriate the same exclusively to the payment of his own -claim, correspondingly diminishing the trust property to the.prejudice of all the other creditors. We think he ought not to be permitted to do it. He cannot ask a court of equity to permit him to break his contract in order that he may
But aside from any question of contract, express or implied, the plaintiff ought not to be allowed to allege that the trust deed is inoperative in respect to any portion of the trust estate. He and other creditors have accepted it as to all, and have thereby acquired certain rights and have received certain benefits. Good faith requires that each one shall stand by it as all understood it. No one now will be permitted to insist upon a different interpretation of the deed and thereby gain a further advantage at the expense of the others; for that would be inequitable and operate as a fraud.
A man will not ordinarily be permitted to impeach and set aside his own title. Obviously he cannot do that, if by so doing he at the same time takes and appropriates to his own use the title of others who stand upon the same legal and equitable plane with himself.
Neither the deed, therefore, nor the assignment was void for want of a more full descriptionj but as to the plaintiff both were operative.
Thus far we have assumed that an assenting creditor cannot impeach these conveyances for fraud. The proposition is abundantly sustained by the authorities cited by the defendant’s counsel, and it is admitted by the counsel for the plaintiff, the main contention being whether this case is within the rule. Having shown, as we think, that it is, we need only state the principle and refer to some of the authorities.
In ordinary cases the grantee has no occasion to assail the deed j he has only to refuse acceptance and it fails to become operative as to him. When he is associated with others in interest as grantee or as a beneficiary, the circumstances may be such that he may desire to avoid the deed in toto ; or his interest may be divided; in some respects it may be for his advantage to accept it, and in others to reject it. In all such cases, if he would avoid the deed, he must be careful not to accept it; for if he accepts he con
In bi-partite conveyances an acceptance is shown by the grantees’ signature to it. In deeds poll his acceptance will ordinarily be presumed, if he has knowledge of the deed and expresses no dissent.
These conveyances were for the benefit only of those who should accept, and they were required to manifest their acceptance by doing certain things. The party represented by the plaintiff, with knowledge of the facts complied with the conditions imposed and thereby accepted the deeds, and by accepting was entitled to receive and did receive a portion of the trust funds. In doing so the corporation impliedly agreed that the other accepting creditors should have just what the deeds purported to convey to them, or for their benefit. If now in violation of that agreement the plaintiff is permitted to appropriate a portion of the trust estate to his own exclusive use, it operates as a fraud upon all the other assenting creditors. Ex parte Alsop, 1 De G., F. & Jones, 289; Ex parte Stray, L. R., 2 Ch. App., 374; Bump on Fraudulent Conveyances, 460; Burrill on Assignments, § 503; Schuyler's Case, 3 Benedict, 200 ; Adlum v. Yard, 1 Rawle, 163; S. C., 18 Am. Decisions, 608; Bodly v. Goodrich, 7 Howard, 276; Clay v. Smith, 3 Peters, 411; Rapalee v. Stewart, 27 N. York, 310; Chafee v. Fourth Nat. Bank, 71 Maine, 514.
In a very recent case in the state of New York it was held that a party entitled to rescind a contract on the ground of fraud loses that right by bringing an action to . enforce the contract after knowledge of the fraud. Acer v. Hotchkiss, 97 N. York, 395.
For these reasons a majority of the court advise judgment for the defendants.
In this opinion Pakk, C. J., and Loomis, J., concurred.
Dissenting Opinion
dissenting. In disposing of this case as it stood upon the record at the time of the hearing upon the demurrer to the plaintiff’s complaint, we held, after much deliberation, that the description in the mortgage deed of November 1st, 1873, was insufficient under the laws of this state to convey to the defendant Chafee any title to or interest in the premises which the plaintiff is seeking to foreclose. We also held that that deed, as a mortgage of real estate in this state, was fraudulent and void as against creditors of the A. & W. Sprague Manufacturing Company, who did not assent to it within the time limited by its provisions.
These conclusions, drawn from what appears on the face of the deed, are not affected by the facts found by the Superior Court from evidence taken at the hearing of the cause upon it's merits. But it appears from the finding that the deed was executed by the A. & W. Sprague Manufacturing Company, not only for the purpose of preventing shrinkage and loss as therein stated, but also with the intent and design to hinder and delay thejr creditors in the collection of their claims, by placing their property beyond the reach of ordinary civil process and with the view of preserving it in their control, possession and use, and continuing their manufacturing business by and through Chafee as trustee, until they should be able to pay their creditors in full and have left a surplus for themselves. It also appears from the finding that the indebtedness and liabilities of the A. & W. Sprague Manufacturing Company and of Amasa and William Sprague, instead of amounting in the aggregate to about §14,000,000, as stated in the deed, amounted to less than §11,000,000; and that the indebtedness of the company alone amounted to only about §8,300,000 and that of Amasa and William Sprague, including liabilities to the company, to §2,633,000, and, excluding those liabilities, to §1,624,000. So that the indebtedness and liabilities of the company and of Amasa and William Sprague at the time the deed was executed, amounted, in the aggregate, to §3,000,000 and upwards less than the amount stated in the deed.
In this state of the case the first question presented is, whether the Franklin Institution for Savings assented to the deed referred to.
By the terms of the deed, the actual assent of creditors, expressed by accepting in discharge of their claims, within nine months from November 1st, 1873, notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, having three years to run, and bearing interest at the rate of seven and three tenths per cent, per annum payable semiannually,, or by agreeing to extend the time of payment of their claims for the period and according to the provisions of those notes, was necessary to entitle them to the benefit of the security which that deed provided.
From the records of the Institution for Savings, which form a part of the record in this cause, it appears that its board -of trustees, at a meeting held on the 14th of April, 1874, passed the following votes :—
“ Voted—that the standing committee be authorized to exchange the Sprague liabilities for the new notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, on the terms proposed by the trust deed to Z. Chafee; the bank retaining the original paper as collateral security.
“ Voted—that should the standing committee fail in making the above named settlement, they are hereby authorized*375 to make the exchange of the above named paper as in their discretion they may deem best for the interest of the bank.” Acting upon the authority thus conferred, the standing committee of the institution, on the 15th of April, 1874, passed a vote in the words and figures following;
“ Voted—that the treasurer be authorized to receive the new notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, for the amount of the acceptances of Hoyt, Spragues & Co., held by this bank, •$670,000 j and also for the amount of the note of A. & W. Sgrague Manufacturing Company indorsed by A. & W. Sprague and Charles Greene, $57,000. The bank to retain the original paper with the following indorsement on the acceptances of Hoyt, Spragues & Company; A. & W. Sprague Manufacturing Company’s mortgage notes accepted as collateral hereto; time given to drawers and indorsers hereon, according to the tenor of said mortgage notes.’ All payments of interest or principal on the mortgage notes or on the original paper, to be indorsed on both the new notes and the original paper. The bank to receipt to Z. Chafee, trustee, (see copy on file,) for the new notes, and Z. Chafee, trustee, to sign an agreement to hold harmless this bank on account of the mode of computing interest should said Z. Chafee settle with any other party in a different manner, or should any court pronounce this method of settlement illegal. (See document on file.) The treasurer is further authorized to receive the interest on the above named mortgage notes in advance, allowing rebate of interest on $11,866 from April 14th to July 1st, 1874, at 7^ per cent., as per schedule on file, to which reference is now made.”
After the passage of this vote, but on the same day, the treasurer received from the defendant Chafee, as trustee, promissory notes of the description mentioned in the mortgage deed to the full amount of the A. & W. Sprague Manufacturing Company’s liabilities and also a sum of money equal to the interest thereon to July 1st, 1874, with a rebate as provided by the vote of the standing committee, and
“Received of Z. Chafee, trustee, under the mortgage deed of the A. & W. Sprague Manufacturing Company and others, dated November 1st, 1873, the following notes of the A. & W. Sprague Manufacturing Company, issued under said mortgage, numbered [the numbers of the notes written here.] The above are issued and accepted as collateral security for the drawers’ and indorsers’ obligations upon the following described drafts of the A. & W. Sprague Manufacturing Compamy upon Hoyt, Spragues & Co., and by the latter accepted, viz; drafts numbered—[numbers of the acceptances of Hoyt, Spragues & Co., written here with the amount of each.] In consideration of the above, time is given to the drawers and indorsers of said drafts according to the terms of said mortgage notes. Providence, April 15, 1884.
“ Tranldin Institution for Savings.,
“By T. Salisbury, Treasurer.”
Chafee then delivered to said Salisbury an instrument in writing, signed by himself as trustee, and dated Providence, April 14th, 1874, of which the following is a copy:
“ Whereas, in the exchange of the ‘ Sprague paper,’ so called, held by the Franklin Institution for Savings, under the trust mortgage executed and made to Zechariah Chafee .to secure the liabilities and indebtedness of the A. & W. Sprague Manufacturing Company, of A. & W. Sprague as co-parfners, and the individual indebtedness of William Sprague and Amasa Sprague, a difference of opinion exists between said trustee and said Institution for Savings as to the mode and manner of computing the interest on the same—the institution claiming that it is entitled to seven and three tenths interest on notes of A. & W. Sprague Manufacturing Company issued in settlement from the first January, 1874, rebating the same interest on paper not due on first January, 1874, from said first January, 1874, to the maturity of said paper; the said trustee claiming that six per cent only should be allowed up to the time*377 of the exchange of said paper, and seven and three tenths interest from said day of exchange to first July, 1874; that this mode of settlement should apply to all paper not exchanged before the first day of April, 1874, that being the time when said institution became a party to said tnist mortgage. The.said institution now makes the exchange under this protest, that if any legal decision of the courts of this state should determine that the mode of calculating interest suggested by the institution is a legal mode, or the said trustee shall adopt that mode after the first of April, 1874, of computing the interest in the exchange of any other of the paper of the said mortgagors in said trust, he, the said trustee, shall pay to said institution the difference in the amounts of interest between the two modes of computation, whatever the same may be; to which protest said trustee assents and hereby agrees to pay said difference in interest accordingly.”
The assent of the Institution for Savings to the mortgage deed as it stood at the time the assent was given, is unquestionably established by the facts disclosed by these proceedings, if the institution couid lawfully assent to the terms of such a deed. It was an acceptance of the security provided by that deed for the debts due to the institution from the A. & W. Sprague Manufacturing Company and A. & W. Sprague, and upon the terms and conditions set forth in the deed. But the deed as it then stood (and it has ever since remained unchanged) did not embrace the property in controversy or any other real estate in this state. That property, therefore, was no part of the security provided by the deed for the payment of the mortgagors’ debts, and no creditor assenting to the deed had a right to rely upon it as such. The assent was limited to the terms of the deed and did not extend beyond them, but was exactly co-extensive with them. Bouvier in his Law Dictionary, vol. 1, page 154, says: “ Assent must be to the same thing in the same sense; it must comprehend the whole of the proposition, must be exactly equal to its extent and provisions, and must not qualify them by any new matter.”
The next question is as to the effect of the assent upon the rights of the plaintiff, assuming, for the purposes of the inquiry, that the institution had the authority and power to express the assent. Does it preclude him from prosecuting and maintaining this action ? The counsel for the defendants contends that it does, because he claims that the prosecution of the action is an attempt on the part 'of the plaintiff to repudiate the mortgage; which, he insists, the assent estops him to do. And he cites several authorities in support of this claim. Those authorities lay down the doctrine that a creditor who has assented to a deed of trust made for his benefit and for the benefit of other creditors, shall not afterwards, though the deed be fraudulent, be allowed to repudiate or impeach it. And that, no doubt, is the established doctrine where the assent is expressed with full knowledge of all the circumstances connected with the execution of the deed. The reason is that if a party assents to a deed with knowledge that it was executed with an intent and design to hinder, delay or defraud creditors, he makes himself, in one sense, a party to the fraud and must suffer the consequences of his act. But it is also well established, as already stated, that where the assent to' such a deed is given in ignorance of its fraudulent character, the creditor is not bound by the assent, and may disaffirm the act on the discovery of the fraud. Van Nest v. Yoe, 1 Sandf. Ch., 4; Johnson v. Rogers, 14 Alb. Law Journal, 427. This, however, is not a case, as it now stands, and has hitherto stood upon the record, to which the doctrine stated has any application. The plaintiff is not now prosecuting this action for the purpose of repudiating or impeaching the mortgage deed or the assent of the Institution for Savings to the terms of it. He has no occasion or reason for doing so, so long as the deed remains as it now is, because the property he is seeking by his action to foreclose is not embraced in that deed and constitutes no part of the
It was suggested upon the argument by the defendants counsel, and the suggestion was favorably received by a majority of the court, that as between the A. & W. Sprague Manufacturing Company and Chafee, the trustee, the propertj'- in controversy, in equity, was conveyed by the mortgage deed; that it was intended to be so conveyed to the latter, and if by mistake it was not, Chafee, by a bill in equity, might cause the deed to be so reformed as to include it. The jurisdiction of courts of equity to correct mistakes in deeds and other written agreements, so as to make them express the real intention of the parties, is well established. But the allegations in the pleadings lay no foundation for its exercise in the present case. The defendants were apprised by the decision of this court upon the demurrer that the description in the mortgage deed was not sufficient under our laws to convey to Chafee any title to, or interest in, the property in question, and that in respect to that property the deed, though not fraudulent, was void. The allegation in the complaint upon which the decision was rendered was, that the deed was fraudulent and void as to the plaintiff, because there was no description or boundaries given, and no reference was made in the deed to any book or document describing the boundaries of the land attempted to be conveyed by the deed, and the land was only described as “all the property, real, personal and mixed, not exempt from attachment by law, which the parties of the first part or any of them have and hold in the following towns of the state of Connecticut, viz. s Sterling, Sprague, Scotland and Windham.” The answer of the defendants was a simple denial of the allegation. So that the only question upon this part of the case which the court could consider was, whether the description in
There are other reasons why the plaintiff should not be thus estopped and precluded, and why, as to him and the
The record shows that as early as the 28th of October, 1878, the affairs of the institution had become so much embarrassed that it was unable to pay its depositors the sums of money called for by them, according to the charter and by-laws, and that on the following day the governor of the state of Rhode Island, pursuant to law, appointed commissioners to visit and examine it and to inquire whether it had been and then was managed according to law, and to ascertain and state the condition of the same,—it having a few days previously refused payment to its depositors of sums exceeding twenty-five dollars on each account. The record also shows that the commissioners so appointed performed the duty devolved upon them, and found the institution in such a condition, owing to the large amount of suspended paper it held against the A. & W. Sprague Manufacturing Company and A. & W. Sprague, that they recommended a suspension of further payments by the institution, and submitted a report of their doings and the result of their inquiries to the General Assembly at its session in January, 1874. The record further shows that the standing committee of the institution, at a meeting held November Bd, 1873, passed a vote directing the treasurer to conform to the recommendation of the commissioners and to allow no withdrawal of deposits until he should he allowed to do so by that committee. And on November 18th, 1873, the board of trustees adopted and ordered to be published the following statement:—
“ Franklin Institution for Savings, Providence, R. I. This institution was examined on the thirtieth of October last by the commissioners appointed by the governor, and their statement of its condition has been published. In view of its situation the commissioners and the standing committee deemed it best for the bank to cease receiving and paying out deposits. The dividend usually declared November 1st, was omitted. The suspension of Hoyt, Spragues & Company and the A. & W. Sprague Manufac*384 taring Company, and the extraordinary condition of the money market, render it impossible for the institution to provide for the large amount of withdrawals notified for the 16th of November. The payment of the withdrawals notified under the sixty day rule must depend upon the condition of the money market, the ability to turn its securities into money and the early settlement of the indebtedness of the above named houses. If such settlement can be reached (of which there is a good prospect) the trustees believe that the depositors will ultimately suffer no loss. The attention of the depositors is called to the annexed condensed statement of the condition of the bank as published by the commissioners.
“ By order of the board of trustees.
“T. Salisbury, Treasurer.”
The statement published by the commissioners showed the liabilities of the institution, at the time they examined it, to be $2,819,723.52, and its resources, including its claims against Hoyt, Spragues & Co., A. & W. Sprague Manufacturing Co. and A. & W. Sprague, the same amount.
On November 1st, 1873, the standing committee directed a notice to be sent to parties whose notes secured by mortgage would fall due the next month, and to certain other parties, that the situation of the institution made the speedy conversion of a large portion of its assets into money necessary in order to meet the demands of depositors. On December 1st, 1873, the board of trustees, by a vote then passed, authorized the standing committee to notify all persons indebted to the institution, where the debt was secured by mortgage and due during that month and thereafter, that the same would be payable at maturity, and that no such mortgage securities would be extended by the payment of the usual semi-annual interest in advance, and that rebate of interest would be allowed when debts were paid before maturity. On December 13th, 1873, the members of the institution, at a meeting then held, appointed a committee to examine its affairs, to nominate a new board of trustees, or to recommend the adoption of
On Februarj' 25th, 1874, the standing committee adopted a form of an agreement to which the signatures of the depositors were to be invited. It was as follows:—
“ We, the undersigned, depositors in the Franklin Institution for Savings, having confidence in the present board of trustees, and deeming it desirable and for the interests of the depositors that the institution should continue its business, hereby severally agree that upon the resumption of business we will not withdraw our respective deposits or any part thereof, except dividends of profits, but permit the same to remain in the institution for such reasonable time in the discretion of the trustees as shall seem to them necessary.”
This paper was submitted to the board of trustees March 2d, 1874, and that board, by vote, added thereto the following:—“The above agreement is not binding unless one half of the depositors sign^ the same, representing three fourths of the amount of the deposits.”
Depositors wene requested to sign the paper so adopted by the standing committee and amended by the board of trustees from March 2d, 1874, until April 28th, 1874, when the standing committee, at a meeting then held, declared it to be inexpedient longer to ask depositors to sign it.
What number or proportion of the 6558 depositors were invited to sign, and what number or proportion did sign their paper, the record does not show. But presumably the
This report was laid before the standing committee of the institution on the 24th of March, 1874. That committee apparently paid little heed to it; but at the close of their proceedings the treasurer, by general consent, was directed to proceed with the ordinary business of the institution as usual. There was no change in the condition of the institution between that time and the 28th of April, 1874. It
But there is a graver reason than either of those assigned why the plaintiff should not be estopped and precluded from prosecuting and maintaining this action, and why the mortgage deed should not be changed so as to embrace the property in controversy in this suit, or be treated, as against the plaintiff, as a mortgage embracing that property. And that is, the deed is fraudulent and void as against the creditors of the A. & W. Sprague Manufacturing Company in respect to their real estate situated in this state, and may, if it be changed or treated as suggested, be impeached by non-assenting creditors, and by creditors assenting in ignorance of the fraud, and upon their application may be set aside. In the first place, the grossly exaggerated statement in the deed of the indebtedness and liabilities of the company, and of A. & W. Sprague, constituted a badge of fraud, as it must have been intentionally made j and, unexplained, it justifies a finding of fraud in fact in the concoction and execution of the instrument. Wait on Fraudulent Conv., § 228, and cases there cited. “No device can be more deceptive and more likely to baffle, delay or defeat creditors than the creating incumbrances upon their property by embarrassed men for debts that are fictitious or mainly so. The false pretence of a debt, or the designed exaggeration of one, is an act of direct fraud.” Per Ruffin, C. J., in Hawkins v. Alston, 4 Ired. Eq., 145. In the next place, the deed was fraudulent, as we held on demurrer, because it pledged the property of the A. & W. Sprague Manufacturing Company, a corporation in insolvent circumstances, not only for its own debts and liabilities, but also for the debts and liabilities of Amasa Sprague’ and William Sprague. De Wolf v. A. & W. Sprague Manufacturing Co. et al., 49 Conn., 282. Those parties, as partners and as individuals, joined the company as grantors or mortgagors in the deeds, and pledged their property for the company’s debts and liabilities as well as for their own. But they were stockholders of the company, and by the laws of
In view of these facts and the magnitude of the fraud shown by them to have been perpetrated in the execution of the mortgage in question upon the creditors of the A. & W. Sprague Manufacturing Company, I am unable to see upon what principle of law or equity the plaintiff can
The decision of the Supreme Court of Rhode Island—the court of last resort in that state-—-affirming the validity of the mortgage deed, is entitled to the respect in this and other states which is due to such decisions on principles of interstate or international comity. On those principles
There are other reasons which seem to me to be sufficient why the mortgage deed should not be treated as a mortgage of the property in controversy, or changed so as to make it so, and why judgments should be advised in favor of the plaintiff.
For these reasons I am of opinion that the plaintiff is entitled to judgment of foreclosure for the full amount of his lien, and that the Superior Court should be so advised.
Granger J., concurred in this opinion