Green v. Tanner , 49 Mass. 411 ( 1844 )

Wilde, J.

The facts in this case are very complicated, but the principles of law upon which the decision of the court is founded, render many of the facts immaterial. The plaintiff, in his bill, prays for a decree of redemption of a certain estate mortgaged to Christopher Rhodes and others, averring that the mortgage debt has been fully paid, and that various other mortgages of the same estate, under which the defendants claim, made before the mortgage to the plaintiff, were fraudulent and void. The bill further avers, and the defendants’ answers admit, that Samuel Congdon, being the owner of the premises, subject to the said mortgage to Christopher Rhodes and others, on the 10th of February 1837, quitclaimed all his right and title to one fourth part of said premises to John Jenckes, another fourth part to William H. Drown, and one eighth part to Jonathan Knowles. And the bill then avers, that on or about that time the said Congdon, Jenckes, Drown and Knowles, entered into partnership for the purpose of manufacturing cotton cloth, under the name of the Cove Mill Com pany; and that. their principal capital was the property which they thus held in common, consisting of real and personal estate. It is also averred by the plaintiff, and admitted by the defendants, that afterwards, on the 19th of April 1837, the said Jenckes, Drown and Knowles quitclaimed all their right and title in said premises to the said Congdon, who thereupon conveyed the same in mortgage to Charles Congdon, and, by another mortgage deed, to William H. Waterman.

The bill charges, and the plaintiff’s counsel contends, that these last mentioned conveyances to Samuel Congdon, and from him to Charles Congdon and William H. Waterman, were made with the intent to delay and defraud the creditors of the partnership of their just debts and demands, and so, as to them, were wholly void. This is denied by the defendants, and they insist that all these conveyances were made in good faith, and on good considerations, and without any fraudulent purpose whatever. This then is a question of fact to be decided upon the evidence ; and we are of opinion that there is no sufficient evidence to maintain the charge of fraud. The testimony of Samuel Congdon, if believed, (and we are not aware of any good reason why it should not be believed,) is conclusive against any such charge, even admitting that the estate conveyed was the property of the partners. He testifies that these mortgages to -Waterman and Charles Congdon were made in good faith, and to secure debts due to them, and liabilities incurred by them for him; and that this was known and agreed to by Jenckes, Drown and Knowles. It is true that his testimony is not fully confirmed by Jenckes and Drown. Jenckes testifies that he does not distinctly recollect for what purpose he quitclaimed his interest in the premises to Samuel Congdon, on the 19th of April 1837. And Drown testifies that he did not understand x that any new incumbrances were to be added to the estate, between the time of his quitclaim to Samuel Congdon and his reconveyance back of the same estate. But he admits that it was represented to him that Charles Congdon was interested in one of the mortgages on the estate, and that his name ought to have been inserted in the deed from Samuel Congdon to him We consider this negative testimony as of very little weight against the affirmative testimony of Samuel Congdon, as it may reasonably be ascribed to their defect of recollection ; especially as the same estate was reconveyed to them the next day after the mortgages were given, subject expressly to those mortgages. This and other circumstances confirm the testimony of Samuel Congdon, if any confirmation be necessary. But furthermore, there is no evidence to prove that these conveyances were made to defraud creditors. There is no proof that the firm was insolvent at that time, or that there was any apprehension of its becoming so. It is not sufficient to prove that the partners were in debt, in order to raise a presumption of fraud. The plaintiff, to avoid these mortgages, must prove that they were made with the intention to defraud the creditors of the firm, or subsequent purchasers ; and that the mortgagees had knowledge of such intention. Of this knowledge there is no evi ■ dence ; and Waterman and Charles Congdon testify that they had no knowledge of the affairs of the concern. The evidence., therefore, wholly fails to prove that these mortgages were made fraudulently, as alleged in the bill.

This being the opinion of the court, it becomes unnecessary to consider the question, whether the estate conveyed by these mortgages was or was not partnership property; a question much discussed by counsel, and which might be material, per haps, in reference to the conveyance from Samuel Congdon to Anthony B. Arnold, but for the reasons which will be hereafter stated, in reference to another ground of defence, as to which this question is not material. But without reference to this ground of defence, and without deciding the question, whether, in a court of equity, the real estate in question is to be considered as held in trust for the partnership, and so substantially partnership property, we are strongly inclined to the opinion, that the plaintiff has failed to prove that the conveyance to Arnold is void or voidable on the ground of fraud. In the first place, there is no proof that Arnold, or the City Bank, for whose use and security the conveyance was made, had any notice or knowledge that the property belonged to the partnership ; and this conveyance cannot be impeached by proof of a fraudulent intent on the part of the grantor, unless it is known to the grantee. In the second place, we think the evidence is not sufficient to prove that the plaintiff is a creditor of the partnership. The loan was made to three only of the partners, and their note was given therefor, in their own names, and not in behalf of the partnership. Knowles, the other partner, could not be joined in an action for the recovery of the note or loan. Nor does it appear, from the evidence, to have been a partnership debt. Samuel Congdon testifies that the money loaned was applied to the payment of a debt due by the Cove Mill Company to Jenckes and Congdon; whether in the whole or in part only, does not appear; but whatever was paid for partnership debts would be a good charge against the partnership, in the accounts between the partners. But this would nor affect the contract between the plaintiff and the three partners. They alone were liable on that contract. Bailey v. Clark, 6 Pick. 372.

Then it is contended, on behalf of the plaintiff, that this conveyance to Arnold is void by the Sts. of 13 and 27 Elizabeth, t v-yn made, it is said, by an insolvent debtor, to secure or pay a particular debt exclusively, the trustee and creditor knowing of the debtor’s insolvency, and contains a provision requiring the trustee to pay over any surplus, or to convey the assigned property, upon the discharge of the debt secured, to a third person, to hold for the grantor. But the knowledge by the City Bank, or by Arnold, of the insolvency of Samuel Congdon, does not necessarily affect the validity of the conveyance. The conveyance was made on a valuable consideration, to secure a bona fide debt; and an insolvent debtor has a right to pay or secure some of his creditors to the exclusion of others, unless made in fraud of some bankrupt or insolvent law. In regard to the clause in the deed, authorizing Arnold to pay over the surplus of the proceeds of the sale of the estate, or, if not sold, to con vey the same to Waterman, we think it is no evidence of fraud, unless it was inserted with the fraudulent intention of locking up the funds or property, so that it could not be reached by the said Congdon’s creditors, and this intention was known to Ar nold or the City Bank; and of this there is no sufficient evidence. Samuel Congdon testifies that the conveyance was made to secure a just debt, and there seems to be no sufficient evidence to prove that it was made for any other purpose. Arnold’s deposition, taken by the plaintiff, is in the case, but he was not interrogated on this point. If, however, there were evidence of a fraudulent intent on the part of Congdon, that would not avoid the conveyance, unless Arnold or the City Bank knew that the clause in the conveyance, which is objected to, was made for the purpose of defrauding or delaying creditors; and of this there is no evidence.

I have thus stated briefly, but substantially, the views of. the court, as to these conveyances alleged by the bill to be fraudulent and void. These views, however, are not essential in the decision of the case, if the other ground of defence, on which the defendants’ counsel relies, is well founded. He contends that the question of fraud by the parties to these conveyances is immaterial, and does not affect the validity of the defence, the defendants being bona fide purchasers for a valuable consideration, and without notice of any fraud The principle of law on which the defendants’ counsel relies is well established, and is. not to be questioned, as appears by the case of the Oriental Bank v. Haskins, 3 Met. 338, 339, and the cases there referred to. The defence then is reduced to a question of fact, whether the defendants are bona fide purchasers, as alleged in their answer.

That the answer, being responsive to the bill, is evidence for the defendants, as to facts within their own knowledge, is not denied. And by a well established rule of equity, the answei must be taken to be true, unless contradicted by two witnesses, or by one witness with probable and corroborating circumstances. And it is certain that the defendants’ answer is not thus contradicted and disproved. In their answer, made under oath, they say that all the several deeds and conveyances mentioned in the bill and the supplemental bill, so far as they have any knowledge of the same, were made upon good considerations and in good faith, and with no intent or design to hinder, delay, or defraud the then or future creditors of the Cove Mill Company, or any other persons. And they severally deny any confederation with any person or persons to do or effect any fraud or injustice, or that they have any knowledge of such confederation by others. And Tanner says that the deeds which he has taken state the true considerations therefor.

The plaintiff’s counsel objects to the answer as being too general, and for omitting to state, specifically, sundry facts which the defendants were called upon to answer. But this objection comes too late. The plaintiff should have excepted to the answer, and the defendants might have been compelled to answer more fully.

The answer, however, does state all that seems material to the decision of the cause. It states the consideration of the conveyances to Tanner, and the statement is confirmed by other testimony. It avers also that these purchases were made in good faith, and fully denies the knowledge of any fraudulent transaction by any other person or persons. There is no sufficient evidence to disprove these averments and denials, and they must be considered as true.

It is also objected that Arnold was not a purchaser, except of the right to sell the estate at public auction for the purpose of paying certain debts. But there is no ground for this objection. Arnold was a purchaser of all Congdon’s title and .interest in the estate, in trust, in the nature of a mortgage with a power of sale ; for after the payment or discharge of the debts secured thereby, the estate was to be conveyed to Waterman for the use of Congdon. Nor is it any valid objection, that the deed to Tanner was taken after the deed to the plaintiff; for the title purchased by Tanner was the elder title. We must therefore consider Tanner as a bona fide purchaser, as alleged in the answer, and that he has a valid title under the mortgages alleged by the bill to be fraudulent. We are strongly inclined to the opinion, as before remarked, that no fraud has been satisfactorily proved ; but if otherwise, it cannot invalidate the defendants’ title.

The only remaining question is, whether the plaintiff is entitled to redeem by paying what is due on the mortgages previous to his; and we are of opinion that he is so entitled. In strictness, the plaintiff ought in his bill to offer to pay the sums due, if these mortgages should be held valid ; according to the Rev. Sts. c. 107, § 18. But no objection has been made to the bill for this defect, and the plaintiff may now have leave to amend the bill In this respect.

It is very clear that the defendants’ title under the mortgages made prior to the plaintiff’s mortgage, and their title to the equity under Congdon by a conveyance from him subsequent to the plaintiff’s mortgage, cannot merge so as to defeat the plaintiff’s title. The defendants may, by filing a cross bill, redeem the plaintiff’s mortgage; but, unless they move for liberty so to do, the case must be referred to a master, to take an account, ascertaining the amount due on the mortgages under which the defendants claim, including the deed of trust to Arnold, which we consider as a mortgage with power of sale not executed ; and so it has been argued by the defendants' counsel. In terms, the conveyance was to be made to Waterman, on the discharge of the debts secured; but it wás to be so conveyed for the use of Congdon, which is equivalent to a reconveyance to him. Unless, therefore, the defendants should move for liberty to file a cross bill, the case will be referred to a master to take an account of the sums due on the defendants’ mortgages made prior to the plaintiff’s mortgage. Whether the plaintiff is entitled to an account of the rents, depends on the question whether the defendants, or those under whom they claim, were in possession under the prior mortgages.