245 Mass. 440 | Mass. | 1923
The plaintiff in November, 1920, secured an option on a tract of land in that part of Newton known as Auburndale, on which he desired to have a building constructed. He made a contract in writing with Harry B. Brown, a builder, which provided that Brown was to build a house on the land, that Brown was to secure two mortgages aggregating $9,600, and that on the completion of the house the plaintiff was to assume the mortgages and pay Brown $2,150. The mortgages were to be executed to parties designated by Brown. Although the plaintiff had merely an option on the real estate, the contract stated that he was the owner; it recited that, if Brown failed to construct the house in accordance with the plans, the architect was to return the $2,150 deposited with him by the plaintiff, and if the plaintiff failed to carry out the contract, the architect was to pay Brown this sum of $2,150 as liquidated damages.
Shortly after November 10,1920, Brown deposited a copy of the contract with Ralph Mann, who was at that time president of the defendant Park Trust Company, stating
On December 18, 1920, Brown took the Fee note indorsed in blank and the assignment of the mortgage to the Park Trust Company. He there for the first time saw the vice-president, who had been demanding of Brown additional security on certain Dwight and Androscoggin contracts on which the defendant trust company had lent money to Brown. Brown delivered to the vice-president the Fee note and assignment, and also a mortgage on other property in Auburndale known as the Cook property. The note, assignment and mortgage were given as additional collateral for the Dwight and Androscoggin contracts and were so applied. The vice-president did not know at this time that the original contract with the plaintiff was in possession of the trust company, and there was no reference to this contract on the face of the note and assignment. The master found that, had the vice-president made such an investigation as would have been made if the trust company were
When the Reynolds contract was signed, Brown had planned to have Reynolds pinchase the property in the name of Fee, to have Fee give him (Brown) the mortgage and note, and to use. the note and mortgage as collateral for the loan
A fraud was committed by Brown on Reynolds; but if the Park Trust Company was a holder for value, and received the note with the assignment of the mortgage without knowledge of the infirmity or defect, or knowledge of such facts that its action amounted to bad faith, it can hold the security," and the plaintiff cannot have relief against it. Brown was indebted to the trust company. It was, therefore, a purchaser for value when the note was transferred to it as security for a preexisting debt. At common law, in this Commonwealth, the taking of a negotiable promissory note before maturity as security for a preexisting debt, is a taking for value. Goodwin v. Massachusetts Loan & Trust Co. 152 Mass. 189, 199. See also Boston Steel & Iron Co. v. Steuer, 183 Mass. 140, 143. Under the negotiable instruments statute G. L. c. 107, § 48, “ An antecedent or
The master found that the trust company had no notice of the fraud of Brown, and that when the note and assignment were received both were in due form; his findings on this question are conclusive unless it appears from the report that they are clearly wrong. A copy of the Brown-Reynolds contract was left with the president of the trust company within a short time after its execution; but no money was then lent on it, and nothing was said concerning its application as security for Brown’s indebtedness. It was deposited with Mann, because Brown at some time in the future contemplated asking for a loan on the strength of the contract; and during the six weeks following, the attention of the trust company was not directed to it. At no time was this contract assigned to the company. The contract shows on its face that Reynolds was the owner of the real estate, but as matter of fact he was not the owner; he was merely the holder of an option to purchase, and it was not until after December 18, 1920, that the trust company learned that he was not the owner. It is expressly found that the vice-president had no knowledge that the Reynolds-Brown contract was held by the trust company at the time it received the Fee note and assignment, together with the mortgage on the Cook property, as additional collateral for the existing loans. The trust company had no knowledge, when the note and assignment were delivered to it, of any plans of Brown to have Reynolds purchase land in the name of Fee and to use the note and assignment for his own purposes. These are findings of fact and show that there was no notice,
On the facts found, no notice is to be imputed to the trust company. There was no conversation with Mann when the note and assignment were delivered; he did not examine the Reynolds contract when it was left with him; no request was made at that time for a loan, and when Brown subsequently requested a loan the note and assignment had already been placed with the trust company as additional security for the Dwight and Androscoggin contracts.
In view of the master’s findings that the Park Trust Company had no notice of Brown’s plan to have Reynolds purchase the land in the name of Fee, or of Brown’s plans to use the note and assignment for his own purposes; that the vice-president had no knowledge when the note and assignment were received that they related to the Reynolds contract; that the contract had been changed; or that the mortgage to Fee was on the property to which Reynolds had a claim; the trust company is not to be charged with constructive knowledge of the fraud of Brown and notice is not to be imputed to it of any defect in the title of the assignment or infirmity in the note.
There was no finding of fraud on the part of the trust company; neither was it found that it had knowledge of such facts as would show that in taking the note and assignment it acted in bad faith. An investigation by the officers of the trust company would have shown that Brown had defrauded Reynolds, but they were not bound to make such investigation. Reasonable cause to know of a defect in the instrument is not the equivalent of knowledge. Fillebrown v. Hayward, 190 Mass. 472. Pierce v. O’Brien, 189 Mass. 58, 60, and cases cited.
As the trust company became the owner of the note and assignment for a valuable consideration, the transfer cannot be set aside in the absence of knowledge of fraud or participation in it. Pierce v. O’Brien, supra. Gately v. Kappler, 209 Mass. 426, 431. Cohen v. Levy, 221 Mass. 336, 339. The fact that the original contract was in the possession of the trust company and that the mortgage was not delivered
Strong v. Jackson, 123 Mass. 60, and Murphy v. Barnard, 162 Mass. 72, are to be distinguished. The record title of the mortgage purchased by Miss Barnard in Murphy v. Barnard, was not in the name of the vendor, but in the name of Mrs. Patch, to whom it had been previously sold; and the unrecorded assignment from Mrs. Patch to the vendor’s clerk was held to be not merely voidable, but utterly void. In the case at bar, the real estate on which Reynolds had the option was purchased in the name of Fee, the mortgagor,-, and the mortgage to Brown recited that the premises were the same “ conveyed to me ... by deed of even date to be reorded herewith.” The deed to the plaintiff was made subject to this mortgage. The transaction was not void, as in Murphy v. Barnard. In Strong v. Jackson, 123 Mass. 60, Jackson held an assignment of a note and real estate mortgage, given by one McQuaid to the plaintiff, as collateral security for a debt due him from Kingsley. Jackson assigned the mortgage, indorsing the Kingsley note, and passed these instruments to the Tremont National Bank. Later he indorsed the McQuaid note in blank and delivered it to the First National Bank; and also assigned to that bank the McQuaid mortgage; no reference being made in this assignment to the Kingsley note. It was held that if the First National Bank had examined the record, it would have been apparent that Jackson was committing a fraud; that the assignment to him would have shown that he held the note for a purpose inconsistent with the sale of it, and the further fact that he had already disposed of the title which he originally acquired.
Merchants National Bank v. Marden, Orth & Hastings Co. 234 Mass. 161, and the cases relied on by the plaintiff, do not conflict with what is here decided.
The decree of the Superior Court dismissing the plaintiff’s bill was right; and it is affirmed.
So ordered.