Hunt v. Rousmanier

12 F. Cas. 933 | U.S. Circuit Court for the District of Rhode Island | 1823

STOEY, Circuit Justice.

There is no longer any question, that the powers of attorney in this case, though irrevocable by the party in his lifetime, were revoked by his death, and that as instruments creating any lien or security for the debts due to the plaintiff, or any authority to sell, they are functi officio, and completely extinguished. This was clearly settled by the supreme court apon the appeal; and the very elaborate opinion of the chief justice, on that occasion, treats them as naked powers, containing no words of conveyance, and importing no assignment, and as having in the event totally failed in their object of subjecting the interest of Eousmanier in the vessels to the payment of the money advanced by the plaintiff on the credit of the vessels. 8 Wheat. [21 U. S.) 201, 202, 207. It must be taken then, that there is no lien now subsisting upon the vessels, either at law or in equity, which the-court is called upon to enforce. The original bill, indeed, does not Itself attempt to assert any lien as existing on the vessels by any direct allegation. It proceeds merely upon the ground, that the powers of attorney are subsisting securities, un-extinguished and unextinguishable in their efficacy, and in virtue thereof it asks, that k sale of the vessel may be decreed, and the plaintiff paid the amount of his debts out of the proceeds. That ground is completely removed by the decision of the supreme court. The amended bill does not change this aspect of the case. It asserts no distinct agreement for a lien beyond what the powers of attorney actually created; but puts the relief upon the ground, that the parties acted under a mistake of the law, and for this cause it seeks to have a remedy in rem administered in equity in the same manner, as if the law had been, as the parties supposed it. So the bill was understood by the supreme court. The language of the chief justice is, that upon the amended bill, “it appears to the court to be a case, in which the notes, and powers of attorney, are admitted to be a complete consummation of the agreement. The thing stipulated was a collateral security on the Nereus and Industry. On advice of counsel this power was selected and given as that security. We think it a complete execution of that part of the agreement; as complete, though not as safe, an execution of it, as a mortgage would have been.” 8 Wheat. [21 U. S.] 209. This language is too unequivocal to be misunderstood; and it is therefore an undoubted construction of the original and amended bill, that neither of them asserts an existing lien, which the law can recognize; or an agreement, which has not been punctually executed according to the choice and intention of the parties. The plaintiff’s whole case now proceeds upon the notion, that the security selected by the parties has unintentionally failed of effect, and that there is a title to relief, not on account of an existing lien, or an omission to fulfill the agreement, but of a mistake of law, which has rendered the security taken a nullity. It is an attempt to substitute a new security in lieu of that, which has, unexpectedly to the parties, become extinct

I think it necessary to present this view of the bill in a distinct shape, for the plaintiff can recover only secundum allegata et probata. The first consideration is, whether the case is made out in point of fact; the second, which I consider left entirely open by the supreme court, is, whether, upon the whole circumstances, the plaintiff is entitled in point of law to a priority or lien to be created in his favour against the general creditors in a case of insolvency. As to the facts, the testimony of the learned gentleman, under whose advice the parties acted, is direct to the matter of the bill, as I understand the import of the bill. I do not doubt, that he has stated the transactions with entire accuracy. But as he is a single witness in a case, where the answer puts in issue, though in a qualified manner, some of the material facts, if the cause rested solely on his testimony, I do not know, that it would, in a court of equity, be held absolutely sufficient for a decree. The testimony on the other side does however confirm it, as far as it goes. Construing the whole evidence together, it certainly does not establish an agreement for a lien or security different from that taken, but it tallies with the substance of the bill, and shows, that the powers of attorney were the chosen security, and a complete and intentional execution of the agreement There is some difference in point of fact, as to the predicament of the case in respect to the two powers of attorney. It appears, that the first was given after the loan was actually made, the note being dated on the 11th, arid the power executed on the 13th of January. But the second loan does not appear to have been made until after the execution of the second power on the 21st of March; and of course the precedent transactions could be, as to this, considered in no other light, than as mere proposals or negotiations for a loan on such security, as the plaintiff should choose to require. I think too, that the plaintiff’s own evidence shows, that as to the second loan, the plaintiff made it upon the faith of the security so taken, and not upon any general agreement for an absolute lien de facto. If this posture of the facts ought to create a difference in point of law, in respect to the plaintiff’s rights under the different agreements and powers, the defendants are entitled to the benefit. My opinion however will proceed upon a ground equally applicable to both.

Assuming then the bill to be established in its material facts by the proofs, how stands the plaintiff’s case in point of law? It is material to state,.(and I repeat it,) that the question is not, whether a court of equity ought to enforce a subsisting lien; nor whether a court of equity ought to carry into effect an agreement for a lien, which has not been executed at all, or imperfectly executed, by the parties. The bill states no such case. So the supreme court considered it. The language of the court is, the money was advanced, the notes were given, and this letter of attorney was, on advice of counsel, executed and received, as the collateral security, which Hunt required. The letter of attorney is as much an execution of that part of the agreement, which stipulated a collateral security, as the notes are an execution of that part which stipulated, that the note should be given. 8 Wheat. [21 U. S.] 210. The real question now is, whether a court of equity ought “to direct a new security of a different character to be given, or direct.that to be done, which the parties supposed would have been effected by the instrument agreed on between them.” Id. The point formerly considered by the supreme court was, whether a court-of equity could so do. In other words, whether it could give relief for a mistake of law, or only of facts. This is not a controversy between the original parties, where a subsisting security is sought to be enforced against the property, or against the person of the debtor, the property having been withdrawn by a bona fide sale, or otherwise, from the reach of the creditor. It is not a suit against the representatives of a solvent estate; nor against the assignees of a bankrupt, who are in law held liable to the same equities, as the bankrupt himself would be. Whatever may be the remedies in equity in such cases, (with which I meddle not) they do not necessarily govern the present. The court is dealing with a case of irretrievable insolvency, where all the bona fide creditors seek to enforce their just and equitable claims. In such a case the general rule is, that equality is equity. The original security is gone and ■extinguished by death. The plaintiff seeks to revive it, or rather to create a new permanent security in the property, where he has now none. Where is the equity', on which to found such a claim of priority or preference? Suppose no security had been given, and the plaintiff now sought by bill to enforce a lien on these vessels upon the footing of a contract for a lien, which by the •death of Rousmanier was unexecuted. Would a court of equity now enforce it against other creditors in a case of insolvency? What preference has a contract for a lien in point of equity over a contract to pay a debt? If both are simple, unsealed contracts, there seems no reason, why nonperformance of the one should be followed with different consequences from non-performance of the other. Securities actually given, often turn out unproductive; but does that furnish a ground for creating a new one against other meritorious creditors? But the plaintiff’s case is not so strong as that put. The agreement here was fully executed, and the required security given. It is gone; and the plaintiff asks to have relief against the creditors, because the party mistook the law, and imagined ne had a security, which would endure notwithstanding the death of Rousmanier. He did not choose to take a bill of sale or a mortgage, because he feared a responsibility would be thereby incurred to third persons. He now claims, that the court should in effect give him what he rejected; that it should make him an as-signee, or mortgagee, when he chose only to have a power to become the one or the other.

There is no case within my knowledge, where such relief has been granted against creditors of an insolvent estate, under circumstances like the present The case of Mitchell v. Hades, Finch, Prec. 125, appears to me strongly the other way. There, the letter of attorney, which was to receive wages, was irrevocable, and the party, to whom it was given, was a creditor, which circumstance demonstrates (as I think), that it was given as security for the debt. The debtor died, and administration was granted to a third person, and the creditor brought a bill to have payment out of the wages. The court refused it against the rest of the creditors, and ordered the administrator to pay the debts according to the course of law, that is, to distribute the assets without any priority to the plaintiff. See same case, 2 Vern. 391; 1 Eq. Cas. Abr. 45. The case of Lepard v. Vernon, 2 Ves. & B. 51, recognizes the authority of Mitchell v. Eades, and proceeds upon similar principles. There, the testator executed a letter of attorney to Down & Co., who were the bankers of Goodacre & Buzzard, the latter being his creditors, to receive certain sums due him from the board of ordinance. There was parol evidence, that the letter of attorney was given to enable the bankers to apply the money to the payment of -the debt of Goodacre & Buzzard. Down & Co. received sums under the power of attorney after the testator’s death; and one of his executors made an assignment thereof to Goodacre & Buzzard, and gave them also a warrant of attorney to confess judgment against the goods of the testator. Two bills were brought, one by the other executors for an account, the other by Good-acre & Buzzard to enforce the priority of payment under their assignment, and the letter of attorney to Down & Co. Sir William Grant (the master of the rolls) said that the power of attorney was a common power, not accompanying any assignment of the debt, nor making part of any security given to the bankers; that though there was parol evidence, that the testator had declared it was to enable them to apply the money to the debt due to Goodacre & Buzzard; yet that was not enough to operate as an appropriation of the money, or to prevent it from becoming part of the testator’s effects. He therefore decreed against the bill of Good-acre & Buzzard, and ordered the money to be paid to the executors on their bill. Here, the learned judge absolutely refused to create a lien against the general creditors, where there had not been any assignment, although the intention of the parties was admitted, that the money should be applied to the payment of the debt.

[NOTE. An appeal was then taken by the plaintiff to the supreme court, where the decree was affirmed in an opinion by Mr. Justice Washington, who said that equity may relieve against a plain mistake arising from ignorance of law. But where parties, upon deliberation and advice, reject one kind of security, and agree upon another, under a misapprehension of the law governing the nature of the security chosen, a court of equity will not interfere. Much less will it do so when there are other creditors of an insolvent estate, whose equity is equal to that of the appellant. 1 Pet. (20 TJ. S.) 1. See, also, Gases Nos. 0,889 and 6,-898.]

When this cause was formerly before the court, the difficulty of maintaining the bill, as against creditors of an insolvent estate, did not so fully strike me in the light here presented, as it now does. Farther reflection on the subject has brought my mind to the conclusion, that if a mistake of law is to be corrected, or a parol agreement for a lien to be enforced against the party, it is not to be against other innocent creditors, standing upon equally meritorious considerations, and who. for aught we know, may have trusted to the ostensible, unincumbered ownership of Rousmanier in these very vessels for their security. My opinion proceeds upon these grounds; first, that the plaintiff has now no lien or specific security upon these vessels; secondly, that he has no equity to have such lien or security created against the other creditors of an insolvent estate. If an antecedent parol agreement had been set up in the bill for a general and absolute lien, I should have thought, that under all the circumstances of this case, where it was not admitted by the answer, it could not be established in equity upon the testimony of a single witness however respectable. Bill dismissed.

Decree. This cause came on to be heard upon the bill, answer and other pleadings, exhibits, and depositions in the case, and was argued by counsel. On consideration whereof, it is ordered, adjudged, and decreed by the court, that the plaintiff is entitled to no. specific lien or security upon either of the vessels mentioned in the plaintiff’s bill, and has no equity to be relieved in respect thereof, and that his bill be dismissed with costs to the defendants, without prejudice to his right to come in and receive a dividend of the said Rousmanier’s estate, in common with the other creditors of the said estate.