Bean v. Brackett , 34 N.H. 102 ( 1856 )

Bell, J.

Upon the facts found by the commissioner, at the close of the transaction between Gile and P. A. Bean, their relative rights were as follows: Gile was a mortgagee in good faith, in no way affected by the bargains or objects of Palmer and P. A. Bean, and his rights, legal and equitable, as such, could not be affected or impaired by any dealings of theirs, or their assigns, to which he was not a party.

P. A. Bean was a trustee for Palmer, with an equitable right to hold the property for his indemnity against his notes.

Palmer was in equity the owner of the land, subject to the mortgage, and to the legal and equitable interest of Bean as trustee. Cutting v. Pike, 1 Foster 347.

No question of fraud comes in, for though the parties might design to affect the rights of creditors by their arrangements, yet they have not interfered with any property of Palmer. They have as yet put none of his property out of the reach of his creditors. They have merely given him a conditional claim to a part of Gile’s property, and placed it in such shape that Palmer could erect his buildings upon it, as they supposed, in safety from his creditors. But in this object they have failed to succeed. By the Revised Statutes, the right of a party to receive a conveyance by virtue of any contract, is made liable to attachment and sale on execution, like an equity of redemption. Chap. 184, sec. 5 ; ch. 196, secs. 11 and 13. A party, therefore, by taking a bond for a conveyance, does not in any sense place the property out of the reach of his creditors.

If it were otherwise, those who claim under Palmer can not set aside a conveyance on account of his fraud, or a fraud to which he was a party, unless they stand in the relation of his creditors, ( Cutting v. Pike, 1 Foster 347 ;) and as such they can derive no advantage from avoiding the deed of Gile to Bean, or the bond of Bean to Palmer, for it is upon them alone that Palmer’s interest, and their own as derived from him, depends.

Palmer entered upon the land, and erected the buildings in question, and continued to occupy them till March, 1843, when he was dispossessed by the petitionees, under an execution issued upon a judgment rendered in their favor as assignees of John Gile’s mortgage. This entry and occupation of Palmer was notice to every body that he had a claim and interest in this land, (Cutting v. Pike, 1 Foster 347 ;) and it seems to be a complete answer to any suggestion of a fraudulent design to place his property out of the reach of creditors. Such a purpose would seem to have been abandoned when he thus gave public notice of his interest.

The assignment of Gile’s mortgage to the petitioners is to be taken as a bona fide transaction, nothing appearing to the contrary. It vested in them all Gile’s rights not liable to be affected by the private negotiations of Palmer and P. A. Bean. It was not for Gile or for them to take advantage of those negotiations, however fraudulently intended as to others.

As to Gile and his assignees, the buildings erected by Palmer became at once covered by the mortgage; for it is well settled that a mortgage binds not only the estate, and all its appendages, as they were at the time of the execution, but it also binds all buildings and fixtures erected by any person upon the land, unless this effect is prevented by some special agreement of the mortgagee ; and it is immaterial by whom the buildings are erected, or the fixtures attached, except in the case of tenants. Gardner v. Findlay, 19 Barb. 317; Winslow v. Merchants' Ins. Co., 4 Met. 306; Butler v. Paige, 7 Met. 40; Corliss v. M'Lagin, 29 Me., (16 Shep. 115;) Pettingill v. Evans, 5 N. H. 54; Cutting v. Pike, 1 Foster 347.

As to P. A. Bean, and those who stand in his place and hold his rights, the buildings erected by Palmer became a part of the real estate. It is indispensable to give to buildings, so erected, that they would ordinarily become a part of the realty, the character of personal property, that they should be built upon the lands of another person, upon an agreement that the builder should be at liberty to remove them. Wills v. Bannister, 4 Mass. 514; Doty v. Gorham, 5 Pick. 487; 6 N. H. 555; 2 Bour. Inst. 157. Now, here, Palmer, as has been said, was in equity the owner of this property, subject to the payment of his notes to Bean, and Gile’s mortgage, upon the execution of Bean’s bond. His interest was at least of the value of all the buildings he erected.

There was no agreement, express or implied, that Palmer should have a right to remove these buildings in any event. There is no presumption that a party who erects buildings on another’s land does so upon any agreement that they may be taken away. And in the case of a bond for a conveyance, as in this case, every presumption would be against the idea that such an agreement conld have entered into the views of either party. In this case, Bean needed the security of these buildings to make his operations safe, and upon the purposes found by the commissioner, Palmer needed that the buildings should be and continue part of the real estate, as otherwise they might be taken and sold as personal estate, for payment of his debts.

The deed of P. A. Bean to W. P. Bean had no effect but to substitute TV. P. Bean for P. A. Bean, as trustee for Palmer and those who might hold his title. He had notice of the state of the title, and paid no new consideration, and holds merely P. A. Bean’s rights, subject to his obligations.

The mortgage deed of Palmer to TV. P. Bean gave him the right to redeem the original mortgage of P. A. Bean to Gile, if Palmer’s deed is to be regarded as a valid conveyance. If it is invalid, as TV. P. Bean is at' most a mere trustee for the petitionees, who hold, by virtue of the deed of the assignee of Palmer, all the remaining interest in the property, he would have no clam to maintain this petition, unless he can successfully impeach the deed of the assignee.

The mortgage of Palmer to Bean is objected to, because it is not executed or recorded in conformity to the statutes regulating personal mortgages; but as we regard these buildings as real estate, there is no foundation for this objection.

This deed may be construed as conveying to TV. P. Bean the title to these buildings, as a part of the real estate, like a deed of a coajl, mine, or of a chamber in the inns of court, or like an assignment of dower in certain parts of a dwelling-house. Aldrich v. Parsons, 6 N. H. 555; or it may be construed to convey, not the buildings merely, but the land on which they stand, and necessary for their use, agreeably to the settled construction of a deed of a house, mill, &c. Shep. Touch. 94; Co. Litt. 5, b; where Coke says, an acre or more may pass by the name of a house. It is immaterial which of these constructions is adopted, since in either view the deed would be sufficient upon its face to convey to TV. P. Bean the interest of Palmer in the property conveyed, with a right to redeem the mortgage to Gile, and to require a contribution from tbe owner of tbe part not conveyed, if any.

But the commissioner finds that at the date of this mortgage to W. P. Bean, Palmer wras deeply insolvent, as he knew, and he then contemplated taking the benefit of the Bankrupt act, if he could not compromise with his creditors. Having failed to effect a compromise, he filed his petition and was decreed bankrupt.

Under the provisions of the Bankrupt law, such a conveyance was clearly invalid. It provides that all future payments, securities, conveyances, or transfers of property, or agreements made, or given by any bankrupt, in contemplation of bankruptcy, and for the purpose of giving any creditor, indorser, surety, or other person, any preference or priority over the general creditors of such bankrupt, shall be deemed utterly void and a fraud upon this act; and the assignee under the bankruptcy shall be entitled to 'claim, sue for, recover and receive the same as part of-the assets of the bankruptcy.

If the deed of Palmer to Bean should be regarded as utterly void, in the language of the Bankrupt law, a mere nullity, it is of course open to the defendants to take advantage of it, as it would be to any and every other person. But it is contended that this deed is, notwithstanding, not void in the sense of being a mere nullity, but is invalid and avoidable by those entitled by law to take the exception. It would not, for instance, be voidable by Palmer himself, for he must found his claim upon his own fraud and violation of law. If it is to be avoided, it can only be done, it is said, at the election of the assignee, and for the benefit of the creditors, and not of a mere speculator at á sale.

Several cases are cited in the argument in support of this view, which we have examined. In Smith v. Gordon, 6 Law 313, it was held, in substance, that if any right of property would be a burden, rather than a benefit to the estate, the assignee is not bound to avail himself of it, and the property remains unaffected, in the hands of the bankrupt, or, as in that case, in the hands of a creditor. The same point was held substantially by this court in the case of Taylor v. Sumner, in Grafton Co.

In Nixon v. Jenkins, 2 H. B. 135, it was held that a demand by the assignee of goods, collusively sold by a bankrupt, is required, in order to sustain an action, because, till a demand, it is uncertain whether the assignee will not affirm the sale. There must be a disaffirmance on the part of the assignee.

So it was held in Butler v. Hildreth, 5 Met. 49, that an assignee of an insolvent estate may affirm a sale of goods, made by the insolvent for the purpose of delaying or defrauding his creditors, and receive the price of thet goods from the vendee. And Stevenson v. Newnham, 16 Eng. L. & E. 401, recognizes the principle of Nixon v. Jenkins, that the assignee may affirm or disaffirm a contract for goods fraudulently sold by a bankrupt, and holds that the fraud only gives a right to avoid a contract or purchase, and that the property vests until it is avoided.

The inference from these cases, as well as from a consideration of the nature of the case, is, that the assignee has an election to avoid a security made in fraud of the bankrupt law, and that if he does no act indicating such choice, and conveys the ¡property, subject to the mortgage, the purchaser takes it, subject to the incumbrance, and he has no power to avoid it.

It then becomes material to inquire whether the assignee has done any act to avoid the petitioner’s mortgage, or has sold this property free of that incumbrance, so as to authorize these defendants to avail themselves of its defects.

In the report of the commissioner the facts are fully stated, relative to the description of this property in the schedule annexed to Palmer’s petition to be declared a bankrupt, and relative to the petition for and the order of sale of the bankrupt’s estate, the notice of sale, the proceedings at the sale, and the conveyance of the assignee. And from these we think the order of sale was “ of the estate and property of which said bankrupt was seized and possessed at the time of his bankruptcy,” and the conveyance was “ of all the right, title and interest which passed to me by virtue of my appointment and commission as assignee of the estate of said Palmer, in the following described property, to wit, in a certain piece or parcel of land, as set forth in the bankrupt’s schedule, the same which P. A. Bean purchased of J. Gile, together with the house, barn and shed standing thereon,” with an assignment on the bond of “ all the right, title and interest which passed to me by virtue of my appointment and commission as such assignee, in the within bond or obligation.”

Upon the bankrupt’s schedule the buildings were described as mortgaged to W. P. Bean, and the assignee testified that he sold the property as described in the schedule, and not as free of said Bean’s mortgage.

Nothing appears in the case which shows that the assignee did any act to avoid Bean’s mortgage, or designed to convey the property free of that incumbrance, or to grant any power to avoid this mortgage, unless such power results by law from a conveyance of the property.

The question is of course presented in its broadest and most general form, whether the power of avoiding fraudulent conveyances made by a bankrupt, is confined to the assignee, or whether such right passes with the property to the grantee of the assignee, as a matter of course; and, as before stated, we are of opinion that the purchaser in such case takes the property, subject to the incumbrance which the assignee has not chosen to avoid. Bean v. Brackett, Grafton, August, 1846.

It is objected to the title claimed by the petitionees, as derived from the sale of Stevens, the assignee of Palmer, that there is no competent evidence that the notices of the sale were given according to law. It does not seem' to us that there is any foundation for the objection. The witness testified that he posted written notices, and that they were lost. He was the'person whose duty and interest should have led him to preserve them, but he had no knowledge what became of them. This was sufficient evidence of the loss, and his evidence was sufficient as secondary evidence.

It may, perhaps, be doubted whether this petitioner stands in a position to raise a question as to their title. He has in equity no title beyond his claim under his mortgage.

The result, then, is, that the petitioner, being an assignee to the extent of his mortgage in the property mortgaged to Gile, has a right to apply to the court to redeem that mortgage, and to have an account taken of all the income of the propei’ty, and after the due application of this, to redeem by paying his proportion of the balance of the mortgage debt, according to the relative value of his interest, as compared with the residue of the property, and to have a decree discharging the mortgage. He will then be entitled to foreclose his own mortgage, unless the debt and the amount he has contributed to discharge the Gile mortgage is paid.

Upon the facts reported by the commissioner we understand that the rents received, after deducting suitable allowances, are more than enough to pay the Gile mortgage, and that mortgage must be discharged.

The petitionees, then, having been paid the amount of Bean’s notes to Gile by the income of Palmer’s property, Palmer’s notes to P. A. Bean are consequently paid, and W. P. Bean, who holds P. A. Bean’s interest, is now a trustee for himself to the amount of his mortgage, and for the residue, so far as appears to the petitionees. If W.' P. Bean’s claims are paid, he will be a trustee for the petitioners for the whole.

This result renders unnecessary the consideration of several questions discussed in the argument.