text:
    Lewis against De Forest and others. Lewis and others against De Forest and others. Phoenix Bank against Lewis and others.

      A and B, partners, being in failing circumstances, executed certain mortgages of real and personal estate to C, for his security against certain liabilities incurred for them. The condition of each deed specified, that C was accommodation indorser and signer for A and B, on sundry notes, drafts, and bills of exchange of theirs, to sundry persons, banks, &c., to the amount of 50,000 dollars, which notes &c. were then maturing; a particular description of which they were not able to give, but which it belonged to them to pay and meet. At the time the mortgages were given, it was necessary, in order to secure C, that they should be given immediately, and before a more accurate description of the notes &c., could be made; the notes &c. not then being in the possession of either of the parties. It was held, that the mortgages were not void for uncertainty, but were valid, as against subsequent incum-brancers.
    New-Haven,
    1849-1850
    Soon after the execution of the mortgages, C became insolvent, having executed an instrument in writing to D, who was an indorser subsequent to C, of certain of the notes and drafts referred to in the deeds, that he would apply the property mortgaged and the proceeds thereof to the payment of such notes and drafts, as were so indorsed by D; and declaring, by such agreement, that he held the mortgaged property in trust for D, for that purpose alone. C paid and took up, from time to time, such of the notes and drafts of A and B, as he preferred, to an amount greatly exceeding the value of the mortgaged premises ; D assisting him to pay and take up a large portion of them. C then brought suits against A and B, and other parites claiming an interest in the mortgaged premises, to foreclose them. E and other creditors of A and B, appeared in court; and, claiming to be the holders of certain of the notes and drafts of A and B, indorsed or signed by C, ns stated in the conditions of the deeds, prayed that the mortgaged premises should be vested in them, in proportion to their respective claims, on failure to pay the same. It was held, 1. that C, by force of the mortgages, became a trustee of the mortgaged property, for the benefit of all the holders of the paper of A and B, indorsed or signed by C, as referred to in the deeds ; 2. that the agreement of C with D was void, as against the other creditors, C having become insolvent; but that D was entitled to share in the property, in proportion to the amount paid by his assistance; 3. that all the holders of such paper of A and B, were entitled to share in the mortgaged premises, in proportion to their respective claims ; 4. that the fact that C had paid a larger amount, than the whole value of the mortgaged premises, made no difference in this case, as the property remained, and C had become insolvent; 5. that C was entitled to a foreclosure, not merely for his own benefit, but for the benefit of D, E, and the other creditors ; and that, as between these parties, no costs should be taxed against either, but as the suits were necessary to render the property available, the costs should be paid out of the proceeds of the property ; 6. that the other defendants, who claimed merely an interest in the equity of redemption, were not chargeable with costs, unless they should elect to redeem, in which case, they should pay both debt and costs.

      C having paid and taken up alarge amount of the claims against A and B, and E being the holder of certain notes &c. of A and B, which were indorsed by C, after they were due and unpaid, E brought a suit upon them against C, leaving copies with A and B as the debtors of C; and thereby claimed an interest in the property mortgaged by A and B to C. Held, that E, by this process, took no interest in the mortgaged premises, as against the other creditors of A and B, holding claims of the same nature.
    After the mortgages were given to C, the property went into the possession of F, under the authority of C; and F took the rents and profits thereof. Notice iri writing was thereupon given to F, by certain of the creditors of the mortgagors, claiming a share in the mortgaged premises, and that F should account for such rents &c., as had or might come into his hands. At the same time, F had a claim against C, of greater amount than the whole value of the rentsand profits; and claimed aright to set off one demand against the other. Held, that F had no right to apply the rents and profits in that manner, after notice; but was holden. to account with such creditors as had given notice for their proportion of the rents, &c., thereafter accruing.
    A mortgage of certain property was given jointly to W and G, partners, to secure a claim “ on book, for goods sold and delivered, in about the sum of 5,000 dollars,” as specified in the deed ; and to C, to secure him as indorser &c. to the amount of 50,000 dollars. The actual claim of W and G, was 2,505 dollars, 85 cents; and the whole amount of C's indorsements exceeded 50,000 dollars. C received other securities, at the same time, but not enough in the whole to equal the amount of his endorsements. Held, 1. that W and G took pro rata in the premises jointly mortgaged, and only in the proportion of their actual book debt to 50,000 dollars; 2. that the description of W and G's claim was sufficiently certain, and the mortgage valid against subsequent incumbrancers.
    These were suits in chancery, brought to the superior . court, October term, 1847. The first two were brought to foreclose the defendants of their equity in certain mortgaged premises ; the other, by the Phoenix Bank against Lewis and others, claiming that the bank had an interest in the same mortgaged premises, and praying the aid of a court of equity to protect that interest. The bills, answers, cross-bills and supplemental bills, were referred to a committee, who made a report, embracing, among other matters, the following facts.
    On the 9th day of April, 1846, William De Forest and Henry Hine, manufacturers in company, under the name of Win. De Forest & Co., having become largely indebted and greatly insolvent, executed and delivered to Milo Lewis a mortgage deed of certain real estate, called the “ Naug-atuck property,” to which was annexed the following condition : “The condition of this deed is this, that the said Milo Lewis is accommodation indorser and signer for us, on sundry notes, drafts, and bills of exchange of ours, or in our fa-vour to sundry persons, banks, &c., to the amount of 50,000 dollars, which notes, &c., are now maturing, a particular description of which notes, drafts, and bills of exchange, we are not able to give, but which belong to us to pay and meet. Now, therefore, if we well and truly pay said notes, drafts and bills of exchange, and save him harmless from all liability as indorser and signer thereon, to the amount of said 50,000 dollars, then this deed is to be null and void, otherwise good and valid.”

      They also, at the same time, executed and delivered, to - Milo Lewis, and to William B. Lewis and George Lewis, sons of Milo Lewis, and partners in company under the name of Wm. B. & G. Lewis, another mortgage deed of certain other real estate, called the “ Bethany property”, to which was annexed the following condition: “The condition of this deed is this, that we are indebted to the said Wm. B. &. G. Lewis on book, for goods sold and delivered, in about the sum of 5,000 dollars ; and whereas Milo Lewis is accommodation indorser and signer for us, on sundry notes, drafts, and bills of exchange, now maturing in sundry banks, and in the hands of sundry individuals, to the amount of 50,000 dollars, a particular description of which notes, drafts, &c., we are not able to give, or in whose hands they are : now therefore, if we well and truly pay said Wm. B.& G. Lewis their said debt, and save the said Milo Lewis harmless from all liability, as indorser and signer of said notes, &c., then this deed is to be void, otherwise valid.”
    They also gave to Milo Lewis two mortgage bills of sale of personal property, to secure him against the same liabilities mentioned in the other deeds.
    At the same time, William II. Elliott was an accommodation indorser, subsequent to Lewis, on a large portion of the notes, drafts, and bills of exchange, intended to be secured by the mortgages ; and thereupon Lewis, on the 11th day of April, 1846, executed and delivered to Elliott an instrument in writing, which, after reciting the mortgages of the personal property, and of the “Naugatuck property,” proceeded as follows, to wit: “And whereas William H. Elliott is a subsequent indorser of certain notes and drafts, referred to in said mortgages, which I cannot now particularly describe ; I hereby agree, that said property mortgaged to me, and.the proceeds thereof, so far forth as I have power to apply the same, shall be well and truly applied to the payment of the said notes and drafts, of which the said Elliott is indorser as aforesaid; and I hereby declare and agree, that I hold the same in trust for that purpose alone, until said notes and drafts so by him indorsed, are fully paid and satisfied.
    ' In witness whereof, I have hereunto set my hand and seal, this 11th day of April, 1846. Milo Lewis.” [Seal.]

      When the notes, drafts, and bills of exchange, upon which Lewis was liable as indorser, became due; in consequence-of the failure and insolvency of De Forest & Co., he was compelled to assume and take up a large portion of the same, amounting, on the 1st day of February, 1849, with damages included, to the sum of 40,937 dollars, 81 cents.
    Of that amount Elliott, being also accommodation indorser subsequent to Lewis, assisted him to pay and take up 18,895 dollars, 74 cents, by substituting Lewis’s notes indorsed by Elliott; which notes of Lewis were, from time to time, renewed, as they became due ; and some payments were made upon the renewals, partly by Lewis, and partly by Elliott.

    On the 14th of April, 1846, De Forest & Co. mortgaged to the New-Haven Bank the “ Naugatuck property,” and the personal property mortgaged to Lewis, to secure the payment of certain notes and drafts of De Forest & Co., endorsed by Lewis and Elliott; and in the deed there was a provision, that if said indorsers, or either of them, should be compelled to pay said notes and drafts, the mortgage should enure to his or their benefit. These notes and drafts were subsequently paid and taken up, by substituting Lewis’s notes indorsed by Elliott, as mentioned above.
    The committee found, that the book debt due to Wm. B. & G. Lewis, at the time of the mortgage to them, was 2,505 dollars, 85 cents ; that the value of the “Naugatuck property” was 13,010 dollars; that of the “ Bethany property” 2,500 dollars ; and that the personal property mortgaged to Lewis, was sold for 5,161 dollars, 59 cents ; and the avails applied by him towards the redemption and payment of the notes, drafts, and bills taken up by him.
    On the 10th day of April, 1846, Johnson, Bushnell & Rand, and divers other creditors of De Forest & Co., caused the real estate, mortgaged as aforesaid, to be attached the property of De Forest & Co. ; and the former, bieng the first attaching creditors, having recovered judgements in their suits, caused the whole if said real state of be set off ti the on executions, in part satisfaction of their
    judgements. On the 5th day of November, 1847, the Phoenix Bank being holder of notes and drafts of De Forest & Co., en- dorsed by Lewis, to a large amount, after they became and and after the failure of the parties liable thereon, caused suit to be commenced threon, against Lewis, by process off foreign attachment, and copies to be left with De Forest & Co., as the attorneys, agents, factors, trustees, and debtors of Lewis.

    be- came and still is utterly insolvent. Thomas Lewis took pos- session of the real estate mortgaged under and by permission of Milo Lewis, and has ever since occupied the same ; and the value of the rents and profits, on the 1st day of February, 1849, amounted to the sum of 1,871 dollars, for which he re- mains accountable. Milo Lewis is, however, indebted to him, on general account, in more than 2,000 dollars. On the 13th day of August, 1846, the Phoenix Bank gave Thom- as Lewis notice of the amount of their claims against Milo Lewis, and informed him, that they claimed a share of the se- curity given to Milo Lewis, in proportion to their debts ; and so far as property or rents had or might come into his hands, the Bank would look to him for that share, and would expect him to account for the same to them. At the time of the hearing before the committee,
    the debts of De Forest Co., then outstanding, for which Milo Lewis was liable, were the following, viz : To the Phoenix Bank, 14,691 dollars, 27 cents; New

      Haven County Bank, 2,999 dollars, 20 cents; Meriden

    Bank, 669 dollars, 17 cents. The object of
    the bill of Milo Lewis was,
    to obtain a fore- closure of all right to redeem the “ Naugatuck property and that of the bill of Milo Lewis and Wm. B. & G. Lewis was, to obtain a like decree respecting the “ Bethany proper- ty.” De Forest & Co., the Phoenix Bank, the New-Haven Bank, the New-Haven County Bank, the Meriden Bank, Elliott, Johnson, Bushnell & Rand, and other attaching creditors, were made defendants in one or more of the three suits. Johnson, Bushnell Rand, in their cross-bills, set up their
    lien acquired originally by their attachments. The Phoenix Bank, in their several answers, their bill,
    The Phoenix Bank, in their several answers, their bill,and cross and supplemental bills, set forth their proceedings under their writ of foreign attachment, by which, they aver- red, that they had acquired an equitable interest in the debt due from De Forest Co. to Milo Lewis, and in the proper- ty mortgaged for the security thereof, and prayed that the mortgaged for the security thereof, and prayed that the same might be protected for their benefit. They also further claimed, that they, and the other holders of obligations against Be Forest fy Co. endorsed by Lewis, were entitled to have their respective debts paid out of the property mortgaged to Lewis; and prayed,that unless the other claimants of the property paid such debts, the court would decree a conveyance to them.
    The New-Haven County Bank, and the Meriden Bank, respectively filed their answers, claiming each a share of the property mortgaged to Lewis.

    A particular description of all the notes &c., that had been taken up by Lewis, was set forth in his bills. It was also averred, and found by the committee, that, at the time of the execution of the mortgages, none of the said notes, &c., were in the possession of the parties to the mortgage ; that Be Forest Co., then being in failing circumstances, it was absolutely necessary for the security of Lewis, that the mortgages should be executed before a more perfect or accurate description of the notes &c., could be made; and that the best description of them was given, that it was in the power of the parties then to give.
    The questions arising upon the respective claims of the parties, and the facts found by the committee, were reserved for the consideration and advice of this court.
    The case was argued at New-Haven, at the July term 1849. At the session of this court in Fairfield 1850, the case being still under advisement, and questions having arisen concerning the allowance of costs, and the rule of division in the premises jointly mortgaged to Milo Lewis, and Wm. B. G. Lewis; the parties were cited in for the further argument of these questions.

    On the principal argument, Baldwin and Ingersoll, (with whom was Buel,) for Lewis and Elliott, and Bissell for Elliott alone, contended, 1. That the mortgages are not invalid, as against Johnson, Bushnell <f* Rand, the attaching creditors, for want of more particularity. Both the nature and extent of the incumbrance are sufficiently described. Booth v. Barnum, 9 Conn. R. 286. Merrills v. Swift, 18 Conn. R. 257. Bacon v. Brown, 19 Conn. R. 29. and the cases there cited.

      2. That they were given by He Forest, and Fine to Milo Lewis, (heir accommodation indorser, “to secure him as such indorser,” to the amount specified in the conditions; the whole amount of his indorsements exceeding that sum, at the time. If the Phoenix Bank, or any other holder of the indorsed paper, has acquired any interest in the property, by reason of these mortgages, it must have been acquired, either by force of the contract itself, or of some collateral equity, growing out of the relations existing between the parties to the mortgages, and the holders of the indorsed paper.
    But the contract was with Lewis alone, for his protection and indemnity, to a limited amount, and did not purport to convey any interest to any other person. The holders of the paper were unknown, and not in contemplation of the parties. 2 Sto. Eq. 602. § 1195. Homer v. Savings Bank of New-Haven, 7 Conn. R. 478. Thrall v. Spencer, 16 Conn. R. 139. Philips v. Thompson, 2 Johns. Ch. R. 422.

    Again, as to any collateral equity. If Lewis has been damnified to the amount of the property, by reason of payments he has been obliged to make as indorse", so that it is all required for his own indemnity, there can be no collateral equity in favour of any other holders of the paper, to have any portion of it applied to their benefit. He Forest <§■ Co. had a right to prefer them, if they chose. Not having done so, a mortgage by them to their indorser, for his indemnity, equitably imposes upon him no other duty, than that of applying his security to the payment of any liabilities he may be subjected to, as indorser, for his principals. So long as his liability remains contingent, or so long as (it being fixed) he continues to pay, equity creates no rights in favour of any creditor to the property. Having the legal title for his own protection, he has a right so to use it, as will render it most effectual for that purpose. If prior parties are liable on a portion of the paper he has indorsed, he has a perfect right to apply the property mortgaged, to debts for which he is primarily liable. If the law were otherwise, no indorser would ever be safe. All that equity requires, is, that, having the means of indemnifying himself, wholly or partially, he shall give to creditors, to whom he may become liable as indorser, the benefit of the security, til! it is exhausted. An indemnity to the indorser, does not necessarily create a trust for the holders of the paper. Their equitable lien is secondary to that of the indorser. The lien here claimed is a secret, insidious, and invisible lien—not appearing in the contract—and at war with our recording system. Belcher v. Hartford Bank, 15 Court. R. 383. Orvis v, Newell, 17 Conn. R. 101. 2 Path. Obligad. 35. § 520. (Newborn ed. 1802.) Moses v. Murga-t.roj/d, 1 Johns. Ch. 11. 129.
    Having the legal title, and being no otherwise limited by the mortgagors, if he fairly applies the security, to its extent, to the payment of debts, which, as indorser, he is legally hokien to pay,—no creditor, who has not a specific lien by contract, has a right to complain. On the other hand, if the indorser, being insolvent, refuses to apply his security, or to make payments to the amount of it, an equity then arises in favour of those having claims against him as indorser, to which it might be applied, to compel such application. This equity is collateral to the mortgage. It grows out of the conduct of the party secured, in refusing, when insolvent, to make any application of the fund, to the debts for which he is liable as indorser. It rests on the basis of benevolence and general equity merely. Orvis v. Newell, 17 Conn. R. 101. 2 Polh. 33. 35. New-London Bank & al. v. Lee, 11 Conn. R. 118.
    A fund so remaining unapplied, would be justly regarded as in the nature of equitable ássets, and distributed pro rata. It is on this principle that the case of Maure v. Harrison, 1 Eq. Ca. Abr. 93. and the cases that have followed it, have been decided. It is the principle on which rests the doctrine of subrogation or substitution, derived from the civil law. Hence it is, that if an indorser or surety on a specified note, has a counter security, and refuses to apply it, equity will give to the creditor the benefit. If an indorser of many notes has an indemnity to the full amount, which he, being insolvent, refuses to apply, equity will enforce the application. But where the indemnity is but partial, and is applied bona fide to debts within the scope of it,—there being no fund remaining unapplied in the hands of the surety, and no contract with any other creditors creating a lien on the fund,— they must rely solely on their legal remedies against the maker and indorser. No facts exist, out of which a collateral equity can be raised in their favour. Maure v. Harrison, 1 Eq. Ca. Abr. 93. Moses v. Murgatroyd, I Johns. Ch. R,
      119. Homer v. Savings Bank, 7 Conn. R. 478. New-London Bank & al. v. Lee, 11 Conn. R. 112. Wig gin v. Dorr, 3 Sumner, 420. Belcher v. Hartford Bank, 15 Conn. II. 383. Stamford Bank v. Benedict, Id. 445, 6. Thrall v. Spencer, 16 Conn. R. 139. Wade v. Coope, 2 Simons, 155.
    In this case, Lewis, when the mortgage was given, was solvent. His liabilities were all contingent. On the paper held by the Phoenix Bank, there were other parties besides De Forest & Co., primarily liable. He continued to pay, where he was primarily liable, from his own resources, and as he realized from the mortgage, to an amount greatly exceeding the value of all the security he held. To enable him to effect this, he had made, in good faith, his arrangement with Elliott. Under that arrangement, Elliott has assisted him in payments to the amount of about 19,000 dollars, for which he has no other security, as Lewis is now insolvent. He is therefore entitled to a decree, to vest in him the title to the property, on failure to pay the sum so paid by him, with interest from February, 1849. And as against subsequent incumbrancers, Lewis is entitled to a decree on non-payment of the balance of the sums paid by him, with interest.
    3. That in regard to the foreign attachment, in which De Forest & Co. are proceeded against as the debtors of Lewis; if any interest in Lewis’s securities could be so acquired, Elliott had long before that process, acquired a superior right. But no such interest can be acquired, by foreign attachment, under any circumstances. Judah v. Judd, 1 Conn. 11. 309.

      Bristol, for the New-Haven County and Meriden Banks,

    contended, 1. That the mortgage deeds are valid. Their conditions give reasonable notice of the claims intended to be secured. Pettibone v. Griswold, 4 Conn, R. 158. 162. Stoughton v. Pasco, 5 Conn. R. 442. Crane v. Doming, 7 Conn. R. 388. 395. Booth v. Barnum, 9 Conn. R. 286. 290. Hart v. Chalker, 14 Conn. R. 80. Merrills v. Swift, 18 Conn. R. 257.
    2. That the property in question, having been mortgaged to Lewis, to secure the claims held by the banks, &c. they are entitled to the securities in his hands, for the payment of the claims for which they are pledged. Homer v. Savings Bank of New-Haven, 7 Conn. R. 478. 484. New-London

      Bank & al. v. Lee, 11 Conn. R. 120. Orvis v. Newell, 17 Conn. R. 101. Moses v. Murgatroyd, 1 Johns. Ch. R. Union Bank v, Edwards, 1 Gill & Johns. 316. 2 Slo. Eq. § 1047, 58, 65. 1217. Leeds v. The Marine Insurance Company, 6 Wheat. 565. It is the debt, which is to be protected by the fund ; and it makes no difference into whose hands the fund may come, or how it is modified. Until the debt is paid, the pledge accompanies it, and remains for its redemption. Belcher v. Hartford Bank, 15 Conn. R. 383. Hodgson v. Shaw, 3 Mylne & K. 190. 1 Sto. Eq. 592. & seq.
    3. That the doctrine, that the surety has a right to appropriate the property pledged for his indorsements to the payment of such claims, as the surety, at his own option, may prefer, is uaconscientious, and inconsistent with the doctrine of subrogation. It substitutes the will of the surely for the established rules of equity. Eastman v. Foster, 8 Mete. 19. Where a principal applies a payment, equity will not permit a surety to interfere, although if he had applied it differently, the surety might have been relieved. The same rule holds, where the security is given to the surety. Stamford Bank v. Benedict, 15 Conn. R. 437. 444. Union Bank v. Edwards, 1 Gill & Johns. 346. Thrall v. Spencer, 16 Conn. II. 139. Hartford Hank v. Belcher, 15 Conn. R. 381.
    4. That all the holders of the paper, referred to in the conditions of the deeds, by virtue of the mortgages, obtained an equitable lien upon the mortgaged property ; and Lewis thereby became a trustee for those creditors, to pay them in full, if the property is sufficient, and, if not,pro rata. Homer v. Savings Bank, 7 Conn. R. 478. 484. New-London Bank & al. v. Lee, 11 Conn. R. 120. Moses v. Murgatroyd, I Johns,. Ch. R. 119, Eastman v. Foster, 8 Mete. 19. 1 Sto. Eq. 79. § 64./. A court of equity will not assist a trustee to-exercise his mere whim or caprice, in regard to the trust estate, to the disadvantage of the cestui que trusts. The counsel also cited 2 Slo. Eq. § 1197. 1205. 1206. 1 Sto. Eq. 76. § 64. e.

      Kimberly and C. A. Ingersoll, for Johnson, Bushnell & Rand,

    contended, That the mortgages generally were invalid, as against the attaching creditors. They were not given to secure a debt due to Milo Lewis. At the time they given, it was not certain that there would ever be a (jet,t due him from De Forest Sp Co. They purport to be given to secure Lewis against a contingent liability. It has neveras yet been decided, in this state, that such a mortgage need not particularly specify or describe the liability to be secured. Where it has not been done, the mortgage lias not been considered good, as against subsequent incumbrancers. Peltibone v. Griswold, 4 Conn, ii, 158. Shepard, v. Shepard, 6 Conn. R. 37. Hubbard v. Savage, 8 Conn. R. 215. Sanford v. Wheeler, 13 Conn. R. 165. North v. Beldert, Id. 376. No new principle was established by this court, in the case of Merrills v. Swift, which has been cited, See the opinion of Slorrs, J. p. 264. We must therefore look to former decisions, to see what the correct principles are.
    By the decisions which have been made by this court, upon the validity of mortgages of real estate, the following principles have been established.
    First, the particular debt or liability to be secured, must be described particularly in the mortgage ; so that it shall appear upon the record, with reasonable certainty, what the real nature of the transaction is, and what particular debt or liability is intended to be secured. Petlibone v. Griswold, 4 Conn. R. 158. Stoughton v. Pasco, 5 Conn. II. 442. Shepard v. Shepard, 6 Conn. R. 37. Crane v. Deriving, 7 Conn. R. 388. Hubbard, v. Savage, 8 Conn. R. 215. Booth v. Barnum, 9 Conn. R. 286. Sanford v. Wheeler, 13 Conn. R. 165. North v. Belden, Id. 376. Hart v. Chalker, 14 Conn. R. 77. Frinhv. Branch, 16 Conn. R. 260. Merrills v. Swift, 18 Conn. R. 257.
    Secondly, if there is ever any relaxation of the rule, it is in those cases only, where such data are given as will put any one interested in the inquiry, upon a track leading to the discovery of what the particular debt or liability is, which is intended to be secured by the mortgage ; and where the nature of the debt or liability is such, that it could not be reasonably expected that the mortgagor could give a more particular description. See the cases above cited. In the mortgages now in question, the particular liabilities intended to be secured are not specified ; and no track is pointed out, which would lead any one interested in the inquiry, to the discovery of the particular liabilities intended to be secured. The mortgagors pretend not to know, what the particular liabilities are, or where they are. The mortgagee pretends not to know. They do not tell who does know. It is all uncertainty.
    Thirdly, the condition of the mortgage must also be such, and the incumbrance on the property must be so described and defined, as to prevent the substitution of anything, which a fraudulent grantor may devise, to shield himself from the demands of his creditors. Pettibone v. Griswold, 4 Conn. R. 162. Hart v. Chalker, 14 Conn. R. 77. and the other cases before cited.
    There is great danger of fraud in a mortgage of this kind, by the substitution of other notes and drafts. If, in this case, they do not amount to 50,000 dollars, De Forest & Co. have only to make new drafts, and have Lewis indorse them, and the mortgage is made good. It is a gum-elastic mortgage-it may cover anything.
    Again, there is no sufficient reason given in the report of the committee, why the incumbrance was not particularly described. It is fair to infer, that De Forest & Co. conducted their business in the usual manner. Their bill-book would show the amount and date of each note and draft, the time when payable, and by whom endorsed. But the creditors are about to attach. Lewis, knowing this, procures the mortgage to be executed. The substance of the finding is, that if time had been taken for a particular description of the notes and drafts, intended to be secured, the attachments would have been served before the mortgage was executed.
    2. That the mortgage to Wm. B. & G. Lewis, especially, is not good, as against the attaching creditors. It was given to secure a debt of 5000 dollars. But the debt then due them was only 2505 dollars, 85 cents. No good reason is given why their debt was not more particularly described. Same cases as before cited.

      O. S. Seymour, for the Phoenix Bank,

    insisted, 1. That the mortgages were valid, the description of the notes and drafts being as certain, as could be made at the time. Mer-rills v. Swift, 18 Conn. R. 257.
    2. That it is true, as a general proposition, that a mortgage made by the debtor to his indorser or surety, enures to the benefit of the creditor ; and vests in the creditor certain valuable rights, which are now universally recognized and protected by courts of equity, and which are also, in some instances, recognized and protected at law. Belcher v. Hartford Bank, 15 Conn. R. 381. New-London Bank & al. v. Lee, 11 Conn. R. 112. Homer v. Savings Bank of New-Haven, 7 Conn. R. 478. Philips v. Thompson, 2 Johns. Ch. R. 418. 422. Moses v. Murgatroyd, 1 Johns. Ch. R. 119. 129. Kip v. The Bank of New-York, 10 Johns. R. 63. 65. Heath v. Hand, 1 Paige, 329. Bank of Auburn v. Throop, 18 Johns. R. 505. Keyes v. Brush, 2 Paige, 311. Russell v. Clark's exrs. 7 Crunch, 69. Eastman v. Foster, 8 Metc. 20. 28. Wright v. Morley, 11 Ves. 22.

    3. That there is nothing in these mortgages, to prevent the application to them of the general rule. The language of their conditions is the same, as is usual in those that have been held to enure to the benefit of the creditor. Homer v. Savings Bank, 7 Conn. R. 478. The fact, that the property is not sufficient to pay all the debts, can not subject the interests of the cestui que trust to the caprice of the trustee, nor allow him to pay one creditor in full, and leave another wholly unpaid. Immediately on the execution of the mortgages, all these creditors took an equal and vested interest in the mortgaged premises ; and no subsequent act of Lewis has disturbed, or can disturb, their rights. Lewis is also the debtor of all these creditors, on these very claims, to secure which the property was mortgaged. He has consented, by receiving the mortgages, to the sequestration of this property for these debts. If the foregoing propositions are true, it will necessarily follow, that his declaration of trust in favour of Elliott, is a mere nullity.
    4. That the creditors of De Forest & Co. have a claim on Thomas Lewis, for the proceeds of the personal property, and the rents of the real estate now in his hands. He purchased of a mere trustee, with notice of the trust; and Milo Lewis, the vendor, being insolvent, the vendee is bound to see to the application of the purchase money.
    5. That, if the foregoing propositions are wrong, then the payments made by Milo Lewis create a debt in his favour against De Forest & Co., which is secured by the mortgage. The Phoenix Bank has acquired a right to this debt, and to the security incident to it, by their foreign attachment process. The writing executed to Elliott, is not in the way of this process ; for that writing merely purports to be an agreement, to hold the property in trust, for one only of the cestui que trusts. It is an attempt to change the legal effect of the mortgages, and is utterly void ; as it is in fraud of the equal rights of all those for whom Lewis was bound to act as trustee. It docs not purport to assign to Elliott any debt, which Lewis might thereafter have against De Forest & Co., by reason of payments thereafter to be made by Lewis from his own fund. Nor was it the intention to convey any such debt. Nor was notice ever given to any one, of this instrument, as an assignment. Woodbridge v. Perkins, 3 Day, 364. Green & al. v. Gillet, 5 Day, 485. Judah v. Judd, Id. 534. And if it were an assignment, it is only of a portion of the mortgaged premises. At the date of it, Lewis was a mere trustee ; and the writing is conversant only with his conduct as such trustee. If, by subsequent payments, he has acquired rights, they are new rights against De Forest & Co., and new rights against the mortgaged property-rights which he had not as trustee.
    The aid of a court of chancery is therefore needed, to connect the mortgaged premises with the debt, which we have attached. If Lewis is entitled to a foreclosure, the decree ought to be qualified by an injunction against a sale by him, while the foreign attachment process is pending; and with an order, that when we have consummated our right to the debt by judgment and demand, then Lewis’s interest in the mortgaged premises shall be transferred from him, and vested in the Phoenix Bank.

         No briefs of the counsel, on those questions, have come into the hands of the reporter.

   Waite, J.

The first question is, whether the mortgages of the real estate are valid as against the subsequent attaching creditors. Immediately after the execution of these mortgages, the property was attached and subsequently set off, upon executions, as the property of De Forest and Hine, to Johnson, Bushnell & Rand. Unless the property can be holden, by virtue of the mortgages, the title has become vested in the levying creditors.

The object, it is said, was, not to secure the payment of any existing debt, but to indemnify the mortgagee against a contingent liability. But that liability had been previously assumed ; and Lewis had as strong claims for indemnity, as any creditor had, for the payment of his debt.

The principal objection, however, relates to the vagueness of the condition. It does not, it is said, specify the liabilities, in such manner, that the creditors can learn from the record, either the precise extent of the incumbrance, or the means, by which, upon inquiry, that extent can be ascertained. It could be of no use to inquire of the parties ; because the deeds state, that they were unable to give the requisite information.

The case, however, seems to fall directly within the principle recognized by the case of Merrills v. Swift, 18 Conn. R. 257. There, the mortgage was to secure the payment of 1,500 dollars, which the mortgagor owed on book, and by several notes, without specifying the amount or date of any particular note. Yet as the amount of the indebtedness was given, the mortgage was holden valid.

Here, the extent of the mortgagee’s liability is given ; and the committee has found, that a liability to that extent existed, at the time of the execution of the mortgages. The omission to describe the particular notes in the former case, was holden not to be fatal to the deed ; a like omission in the present deeds, can not have any greater effect. And although that case went to the very verge of the law upon this subject, yet we can not discover sufficient ground for distinguishing the present case from the former.

The only material difference is, that one was given to secure a debt of a specified amount, the others to secure the mortgagee against liabilities to a specified extent. The claim for indemnity, in the latter case, as we have already said, is as strong as in the former.

Again, it is said, the mortgage to Wm. B. & G. Lewis is not good, as against the attaching creditors; because their debt is described in the deed as being 5,000 dollars, when in truth it was but 2,505 dollars, 85 cents. But the deed does not profess to give the precise amount of the debt. It is described, as being about the sum of 5,000 dollars. Debts of that character are often unliquidated, and consequently, the precise balance can not always be given. Besides, there is no pretence of any fraudulent misrepresentation of the amount of the debt. The case, in this particular, is no stronger in favour of the attaching creditor, than the one cited, where the amount of the book debt, aside from the notes, was not given.

2. The next inquiry is, who is entitled to the property in question? Lewis, or these creditors, for whose debts he is still liable, by reason of his endorsements ? As against De Forest and Hine, he undoubtedly would be entitled to a decree of foreclosure. He has already paid more than 40,000 dollars of their debts ; and he has a right to call upon them to reimburse him, or be foreclosed of their right to redeem the property mortgaged for his security.

But the controversy is not with them. The claim upon the property is made, by those creditors, whose debts still remain unpaid, and for the payment of which Lewis continues liable. It is as much his duty to pay them, as it was to pay the other creditors. And it is no answer to their claim, that he has already paid more on account of the property, than the whole is worth.

The mortgages were given for his protection, and created a trust for the benefit of these creditors, to whom he was liable. His duty was, to appropriate the property in discharge of his liabilities. So long as he remained solvent, and his creditors did not interfere with his management of the funds, he might apply them as he pleased in discharge of his liabilities. Such disposition he has already made of the personal property mortgaged to him. He has sold it, and paid over the proceeds to such creditors as he preferred ; and although they may have received more than their proportional shares of the property mortgaged by De Forest and Hine, it is now too late to disturb that disposition.

But the property in question remains, as it was, when mortgaged to Lewis. He calls upon the court to give him a perfect title. But his creditors come in, and shewing his insolvency and consequent inability to pay, otherwise than by means of the property in question, ask that it may be applied in fulfillment of the trust created by the mortgages.

The case, under these circumstances, comes directly within the principles recognized in the case of the New-London Banks v. Lee & al. 11 Conn. R. 112. There, it was holden, that the creditors of an indorser, who had become insolvent, and had refused to apply the funds mortgaged to him in payment of his liabilities, were entitled to the aid of a court of chancery, in enforcing the application of those funds.

So, in the present case, Lewis, having become insolvent, has no claim upon a court of chancery, for its aid in depriving his creditors of the funds conveyed to him for their benefit.

3. Another question arises respecting the extent of Elliott's interest in the property. He claims a preference, as against the other creditors, in consequence of Lewis’s agreement to give him that preference. Had Lewis, before any claim was made upon the property by these creditors, applied it, in payment of those debts for which Elliott was liable, such disposition would not now be disturbed. But as yet he has made no such disposition of the property ; nor has he conveyed it, either to Elliott, or any other person. It remains as it was, when first mortgaged. Lewis has simply entered into an agreement, that he will apply the funds in his hands, to the payment of those debts, for which Elliott is liable, and will hold them in trust for that purpose. Can this unexecuted agreement be enforced ? As against Lewis, it might be. But, in consequence of his insolvency, his interest in the property is made to yield to the superior equity in favour of his creditors.

The question then is, whether Elliott presents a stronger claim to be enforced in equity, than those other creditors ? And we are inclined to think, that he does not. He has not, in consequence of that agreement, assumed any new liability. He has simply assisted Lewis in paying debts, for which both were previously liable. But as these creditors, who have been thus paid, would have been entitled to come in, and share in the property in question, had it not been for such payments, we think Elliott is entitled to stand in their places, and be treated as a creditor of De Forest and Hine, to the extent of the debts paid and assumed by him.

It is claimed, that this decision conflicts with that in the case of Thrall v. Spencer, 16 Conn. R. 139. In that case, the indorser parted with his interest, without fraud, and before any claim was made by the creditor. The latter had lain by, for a long period of time, without making claim to any equitable lien upon the property. But in the present case, and in that of the New-London Banks v. Lee & al. the lien is insisted upon, by the creditors, while the property remains in possession of the indorser.

4. The claim of the Phoenix Bank, under their foreign attachment suit, stands upon similar ground. Had they been able to go on, and enforce the payment of their debt in their action at Saw, a court of chancery might not interfere. But when they are obliged to resort to that court, and invoke its aid against the claims of the other creditors ; to obtain that aid, they must shew a superior equity in their favour. This, we think, they have failed to do.

5. What share do the sons of Milo Lewis take in the “ Bethany property,” mortgaged to them and their father jointly? The mortgage was given to the latter, to secure him as an indorser to the amount of 50,000 dollars ; and to the former, the payment of their book debt, supposed, at the time, to amount to about 5,000 dollars. Upon examination, it is found, that the liabilities of the father amount to the sum specified in the deed ; but the book debt of the sons amounted only to the sum of 2,505 dollars. 85 cents.

As the object of the conveyance was merely to secure these two claims, the mortgagees take in proportion to their respective claims-that is, in the proportion of 50,000 dollars to 2,505 dollars, 85 cents.

The fact that Milo Lewis had other property mortgaged to him as security against his liabilities, under the circumstances of the present case, can not affect his interest in the “ Bethany property.” For, it appears, that all the property mortgaged will be insufficient to discharge his liabilities. Had the other property been sufficient for that purpose, his sons might insist upon his resorting to that, for the purpose of letting them in to a greater share in the “ Bethany property.” But such is not the present case.

6. It appears from the report of the committee, that Thomas Lewis, under authority from Milo Lewis, has received the rents and profits of the real estate, since the execution of the mortgages; and is accountable for the same. But he has a debt against Milo Lewis, greater in amount than that for the rents and profits. The question is, how far he has a right to set off one demand against the other.

As Milo Lewis has paid a large amount of the debts of Do Forest & Co. from his own private funds, he has become a creditor of theirs, to the amount so paid by him. So far as they are concerned, he had a right to apply the rents and profits toward the payment of his debt to Thomas Lewis; and the latter might set off his debt against the demand for rents. And this, we think, continued, until the creditors gave notice, that they claimed to have the property, in the hands of Milo Lewis, treated as trust property, for their benefit. Such notice, it appears, was given to Thomas Lewis, by the Phoenix Bank; and from that time, he ceased to have a right to apply the whole rents subsequently received, in liquidation of his debt against Milo Lewis.

7. The remaining inquiry relates to the costs in the suits. The bills were brought to obtain a foreclosure of certain mortgaged premises. So far as the defendants claimed merely an interest in the equity of redemption, they are not chargeable with costs, unless they elect to redeem; and then they must pay both debts and costs. 2 Sw. Dig. 197.

Johnson, Bushnell & Rand attached and levied upon the property, as belonging entirely to De Forest & Co.; and if they did not acquire a valid title as against the mortgagees, they at least acquired an interest in the equity of redemption ; and having such interest, they have a right to redeem the plaintiffs. Under the circumstances, we think they ought to stand upon the same ground as the other defendants, having merely an interest in the equity of redemption, and not be subjected to costs, unless they redeem the property mortgaged.

With respect to the suit of Milo Lewis, he is entitled to a decree of foreclosure, not merely for his own benefit, but for the benefit of his creditors; the Phoenix Bank, the New-Haven County Bank, the Meriden Bank, and William H. Elliott. As between these parties, no costs should be taxed against either. But as the suit was necessary for the purpose of making the property available to these parties, the costs of the suit ought to be paid out of the proceeds of the property, provided it is not redeemed.

A similar decree should be passed in the other suit, brought by Milo Lewis and his sons. No costs should be taxed, either against the plaintiffs, the three Banks or Elliott; but the costs of the suit should be paid out of the proceeds of the property, when sold.

We therefore advise the superior court, to pass decrees of forclosure against all the defendants, who have no interest in the property beyond the equity of redemption ; and in case of their failure to redeem within the time limited, that the property be sold, and the proceeds of the “ Naugatuck property,” after deducting therefrom the costs of the suit and the expenses attending the sale, be divided among the creditors of Milo Lewis, viz. the Phoenix Bank, the New-Haven County Bank, the Meriden Bank, and William H. Elliott, in proportion to their respective claims against him. That the proceeds of the “ Bethany property,” after deducting the costs and expenses of the suit, in that case, be divided among the aforesaid creditors, and Wm. B. & G. Lewis, in proportion to the interest conveyed to the latter and Milo Lewis respectively, by virtue of the mortgage deed to them ; and that the share of the said creditors be divided among them, in the same manner, as the proceeds of the “ Naugatuck property.”

In this opinion the other Judges concurred.

Special decree.


source: Caselaw Access Project

author: Ellsworth, J.

license: Public Domain

text:
    Evarts against The Killingworth Manufacturing Company.
    A corporation, established under the statute relating to joint stock corporations, for manufacturing purposes, passed a by-law, providing, that a president, secretary, and treasurer, should be chosen annually, and should hold their offices until others should be chosen in their stead. The corporation carried on its business in the town of K, for some time, when, being unsuccessful, it disposed of all its property, and closed its business, without the intention of resuming it, except for the purpose of collecting and paying out moneys, and holding a meeting of the stockholders. At a meeting subsequently held, all the stockholders, except G, transferred to him all their shares of stock; and all the officers, including N, the secretary, resigned their offices; which resignations were accepted. These transfers of stock and resignations were made, for the purpose and with the intention of preventing the bringing of any suit, or the legal service of any writ or process, against said corporation, A writ against such corporation was soon afterwards served, by attaching its property, and leaving copies with N, as secretary, and G, as president, who had held those offices, respectively, up to the time of said resignations. On a plea in abatement, for want of legal service, it was held, 1. that said transfers of stock and resignations, having been fraudulently made, had no efficacy to prevent service, and consequently, the leaving of a copy with N, was sufficient; 2. that if otherwise, the leaving of a copy with G, the only stockholder, would probably be deemed sufficient.

      Middlesex,

    July, 1850.
    A corporation does not become extinct, as such, by the resignation of its officers, and the omission to elect others.
    Nor would the mere disuse of its corporate powers, have that effect.
    As to the effect of the last official acts of an out-going secretary or clerk.
    This was an action on promissory notes.
    The officer, who served the writ, stated, in his return, that he attached all the right, title and interest, of the Killingworth Manufacturing Company, in certain real estate, particularly described, and that he left a true and attested copy ot the writ, with his doings thereon endorsed, in the hands of Nathan Griswold, president and director of said Killingworth Manufacturing Company, and within his dwelling-house in Killingworth; and on the same day, he left a true and attested copy of the writ, in the hands of William C. Nettleton, director and secretary of said company, with his doings thereon endorsed ; and on the same day, he left a like copy at the town-clerk’s office in Killingworth.

    In the county court to which the writ was returnable, the defendants pleaded in abatement, alleging, that said writ was not served upon said company, by leaving a true and attested copy of said writ, by a proper officer, with any one, who, at the time of said service, was the secretary of said company ; nor was said writ so served, by leaving any such copy with any one who was a member of said company, at the time of such service, except that such copy was left with Nathan Griswold, by the officer who served the same ; and also a like copy was left, in like manner, with William C. Nettleton ; who were not, either of them, secretary of said company, at the time of such service ; nor was such copy left, in like manner, with any one, who, at the time of such service, was secretary of said company ; nor had said company any secretary, at the time of such service; nor was any such copy left, by the officer who served the same, at the factory of said company; nor at their manufacturing house, or other place, where said corporation transact their business, or exercise their corporate powers, according to the statute in such cases provided.
    To this plea the plaintiff replied, alleging, ]. That the writ was duly served, on the 22d day of March, 1849, by the sheriff of Middlesex county, by leaving a true and attested copy, with his doings thereon endorsed, with William C. Nettleton, of Killingworth, at his dwelling-house in said town, who, at the time said copy was so left in service, was the secretary of said Killingworth Manufacturing Company.

      2. That said writ was also duly served on said corporation» by said sheriff, by leaving a true and attested copy thereof with said Nathan Griswold, at his dwelling-house, who, at the time said copy was so left in service, was the sole owner of all the shares, and capital stock and property of said corporation, and the only person in any manner interested therein, and was then president of said corporation ; and when said copy was so left in service, and for a long time before and ever since, there was and is no place where said corporation transacted its business, or exercised its corporate powers.
    3. That on the 15th day of March, 1849, and previous to the time when the plaintiff’s writ was served, said Nathan Griswold, and William C. Nettleton, and Reuben K. Hinck-ley, were members and stockholders, and the only members or stockholders of or in said corporation ; that during all that time, said William C. Nettleton, was secretary of said company ; that said Griswold, Hinckley and Nettleton, well knowing of the just debt and claims of the plaintiff against said corporation, but contriving and intending to cheat and defraud the plaintiff, and to obstruct and prevent him from sue-ing for and collecting his said just debt and claims, and with intent to render it impossible to make service of the plaintiff’s writ, or of any other writ or process in his favour, or in favour of other creditors of said corporation, against them, the defendants, in any way, did then and there, to wit, on said 15th day of March, 1849, at said Killingworth, wrongfully, injuriously, and fraudulently, confederate and combine together, to cause said William C. Nettleton to convey and transfer all his said capital stock and interest in said company to the said Griswold, and to resign his said office of secretary of said corporation : and that in pursuance of said wrongful and fraudulent design, said William C. Nettleton, on said 15th of
      March, 1849, conveyed and assigned all his capital stock and interest in said company to said Griswold; and did, in pursuance of said design, and with a fraudulent intent as aforesaid, on or about the said 15th of March, 1849, resign his said office of secretary of said company and corporation. And that since his said resignation, said Griswold, Hinckley and Netllelon, and said corporation, have, with the same fraudulent intent and design, wholly neglected and refused to appoint a secretary of said corporation.
    4. That said sheriff, on the 22d day of March, 1849, left in service a true and attested copy of said writ, with his doings thereon endorsed, at and within the dwelling-house of said Nathan Griswold, at said Killingworth ; and if there was, at that time, any place where said corporation transacted its business, or exercised its corporate powers, it was the place where said copy was so left, and not elsewhere.
    These allegations were traversed by the defendants; on which issue was joined.
    The court found the issue in favour of the plaintiff; and thereupon rendered judgment, that the defendants answer over. From this judgment the defendants appealed to the superior court, in which the same issue, joined, by agreement of parties, to the court, was tried, February term, 1850. The court thereupon found the following facts.
    Several persons having, in the year 1848, associated together, under the act then in force, relating to joint stock corporations, for the purpose of carrying on the business of making and selling paper, and having complied with the provisions of that act, were organized and established as a corporation, for the purpose of carrying on said business, under the name assumed by them in their articles of association, viz. The Killingworth Manufacturing Company; which is the corporation, defendant, in this case. This corporation, soon afterwards, ordained and established, among others, a by-law, in the words following, viz. “ Art. 11. The officers of the corporation, shall be chosen annually, and shall consist of not less than three, nor more than five directors, with the powers named in said act, a president, secretary and treasurer, who shall hold and discharge the duties of their offices severally, until others shall be chosen in their stead.” The corporation subsequently commenced, and thereafter continued, to carry on said business, in Killingworth, until some time afterwards, when, having been unsuccessful in business, it sold and disposed of all its property, of every description, including the factory buildings, store and mill, and the real estate connected therewith, in Killingworth ; which was its principal place in this state of transacting its business, while it continued to do business ; and from thenceforth, without any intention of resuming it, wholly ceased to occupy or use said property, for any purpose. It wholly ceased to do any business, except that it subsequently collected in the moneys due to it, and paid them out to the creditors of the corporation, or,some of them ; and except also the holding of the meeting of the stockholders of the corporation, at the house of Nathan Gris-wold, and the transactions at such meetings, as hereinafter mentioned : all of which acts and things were done and took place, before the plaintiff sued out said writ. After the disposition and sale of said property, and the collection and payment out of said moneys, and before the sueing out of said writ, viz. on the 15th of March, 1849, a meeting of the stockholders of said corporation was regularly and legally warned and holden at the house of said Nathan Griswold, in Killing-worth, for the purpose of passing any votes, or doing any business, which might be properly and legally done thereat; that no business was done at said meeting, except what purports to have been done thereat, by the vote hereinafter mentioned ; that all of the stockholders of the corporation, viz. Reuben K. Hinckley, William C. Nettleton, and the said Nathan Griswold, attended said meeting; and that all of the capital stock of said corporation, owned or held by the said Hinckley and Nettleton, was, by them, at said meeting, regularly transferred and conveyed to said Griswold, who thereby then became, and ever since has been, and still is, the sole owner and holder of all the capital stock of said corporation ; that during a period of several months next, previous to said meeting, said William C. Nettleton was, and had been, the secretary of said corporation; and said Nathan Griswold, Reuben K. Hinckley, and William C. Nettleton, were the directors, and only directors, of said corporation, they having been respectively duly elected and appointed to said offices; that, since the said meeting, there has been no election, appointment or resignation of any director, secretary, treasurer, agent, or any other officer of said corporation, nor any meeting or session of said corporation, or of the stockholders, or any of the stockholders thereof.
    The defendants, on the trial, claimed, that before the plaintiff’s writ was sued out or served, viz. at said meeting of the stockholders of said corporation, held on the 15th day of March, 1849, as aforesaid, said William C. Nettleton, resigned his said office as secretary of said corporation ; and said Reuben K. Hinckley, and William C. Nettleton, and Nathan Griswold, resigned their offices of directors of said corporation ; and that said resignations were, at said meeting, accepted, by the stockholders of said corporation; and for the purpose of proving said resignations and acceptance thereof, the defendants introduced in evidence, the record book of said corporation, containing an entry or recital of a vote purporting to have been passed at said meeting, and to be attested and authenticated in the words following, viz.

    “ At a meeting of the stockholders of the Killingworth Manufacturing Company, holden at the house of Nathan Griswold, in said Killingworth, on the 15th day of March, 1849, which meeting was duly warned, and legally holden, by acceptance of the notice for said meeting by all the said stockholders, and at which they were all present. The transfers of stock of said company were made by Reuben K. Hinckley and William C. Nettleton. At the same meeting, Nathan Griswold, Reuben K. Hinckley, and William C. Net-tleton, resigned their offices as directors, and at the same meeting, William C. Nettleton resigned his office as agent and secretary; all which were accepted by said stockholders.” William C. Nettleton, Secretary.

    The court found, and it was admitted, that said vote, and the attestation or certification thereof, and the name of William C. Nettleton, signed thereto, as secretary, were in the handwriting of said William C. Nettleton, and made and entered in said book by him ; and the defendants also introduced parol evidence to prove, that said vote was passed at said meeting ; that the resignations and acceptance thereof, as therein stated, took place ; and that what is mentioned in said vote, as having taken place and been done at said meeting, there took place and was done. The plaintiff objected to the admission in evidence of said vote, and also to the admission of said parol evidence, for the purpose aforesaid; and the said evidence was received by the court, subject to all legal exceptions thereto. If under the circumstances aforesaid, either the said entry or recital of such vote, or the said parol evidence, or both of them conjointly, were legally admissible, for the purpose for which they were offered, the court found, that the said vote was passed at said meeting; that the resignations and acceptance thereof, as therein stated, took place ; and what is mentioned in said vote, as having taken place and been done at said meeting, then took place and was done. If, however, neither said entry or recital, nor said parol evidence, was admissible for said purpose, the court found, that said vote was not passed at said meeting, and that neither of the resignations nor acceptance thereof, as therein stated, and that what is mentioned in said vote as having taken place and been done at said meeting, was not done, and did not take place.
    The court further found, that the said stock was so as aforesaid transferred and conveyed to said Griswold, and that all of the said acts and transactions at said meeting, were done, and that the said vote was passed, by said stockholders present thereat, for the purpose, and with the intention, of preventing the bringing of any suit, or the legal service of any writ or process, or the obtaining of any judgment against said corporation, either by the plaintiff, or any other person, and under an expectation and belief that a suit would otherwise be brought against said corporation by the said plaintiff; and the court also found, that the doings of the officer who served, or professed to have served, the writ in this case, and whose name is affixed to the return thereof, are truly stated in said return.
    Upon these facts, the case was reserved for the advice of this court, as to what judgment should be rendered.

      Ingham, and Spencer, for the plaintiff,
    after remarking, that the only question in this case was, whether the service of the writ was sufficient, contended,
    1. That the copy left with W. C. Nettleton, was properly left. He was secretary of the company, at the time of service. He certainly was so, if he had not, on the 15th of March, 1849, made a valid resignation ; for the mere transfer of all the stock to N. Griswold, did not dissolve the corporation, or vacate the office of secretary. 9 Conn. R. 544, 5.
    In the first place, the defendants offered no legal evidence of his resignation. The recorded vote was not admissible, because if the resignation was eflèctual, the record was made by him after his resignation, when he had no right to make it; both the resignation and its acceptance being immediate, and not taking effect prospectively, as they niight have done, But if otherwise, parol evidence was inadmissible to prove the resignation and acceptance, because it was not the best evidence. A corporation can speak only by its votes ; and the only evidence of its votes are its records. Bartlett v. Kinsley, 15 Conn. R. 334.
    Secondly, the evidence, if admissible, shows only an attempt to resign, which, however effectual it might have been, as between Nettleton and the company, was ineffectual as against third persons to their prejudice. By becoming incorporated, the defendants had assumed an artificial existence, which continued until legally dissolved. As a corporation, they~had formed relations with third parties, which they have no right to annul or render ineffectual, by their own act. A corporation cannot dissolve itself, by its own act; as by the surrender of its charter, unless it is accepted by the incorporating power. 2 Kent's Com. 319. & seq. Revere v. Boston Copper Co., 15 Pick. 351. And if they cannot dissolve themselves directly, they cannot do so indirectly, by accepting the resignation of all their officers and living representatives, and refusing to appoint other; thus reducing themselves to a m ere impalpability and creature of the imaginarytion. The public are interested in the records of a corporation, although private; and the corporation has no right, either to destroy them, or, by their own act, to deprive them- selves of a proper recording and certifying officer. Stat. p. 84. S 133, 134. Thirdly,
    the by-laws of the company are such, that the secretary must continue to hold his office until another is elected. But,
    But, fourthly, if the secretary could resign at all, his resig- nation could only be accepted, by the directors, and not the stockholders; he having been appointed by the former, and they alone having the power to fill his place. 3 Hill's Rep. Rep. 247. No evidence was offered, nor is the fact found, that the resignation was accepted by the directors.

    Fifthly, independently of any general principles on the subject of resignations, this particular proceeding was void, on the ground of fraud, which sufficiently appears from the finding.
    2. That if the company had no secretary, yet the service was good, because a copy was left at their principal place of business in this state. Slat. 54. § 17. As the company had sold their factory, &c., and discontinued their business, without intending to resume it, their former factory could not be said to be their place of business. They had no longer any interest in it, and a copy left there could not have given them any notice. The last and the only place where they had done any business, since they had sold their factory, &c., was at the dwelling-house of N. Griswold, where a copy was left. It was not necessary for the officer to state in his return, that Griswold’s house was the principal place of business, that being the fact.

    3. That if the defendants, had neither a secretary nor a place of doing business, and therefore no service could be made according to the statute, it does not follow, that no service could be made. In that case, a reasonable service would answer, or at least, it would be sufficient to serve a copy upon, or at the dwelling-house of the only stockholder. And, if this is insufficient, the court may order such further notice as it sees fit. The language of the statute is not, that the mode of service therein prescribed shall be the only service, but shall be sufficient notice.
    4. That this case is clearly distinguishable, in principle, from Rand v. Proprietors of Upper Locks, &c., 3 Day, 441. The cases differ in these three important particulars. 1. That was a foreign, this a domestic corporation. 2. The writ was there served upon only one of many stockholders ; here, upon the sole stockholder. 3. There, the corporation had its regular officers; here, it was without a single officer. This case is equally distinguishable in principle from McCall v. Byram Manuf. Co. 6 Conn. R. 428.; because, 1. In that case there was an actual secretary, although residing out of the state. 2. That was a question respecting the validity of an attachment of stock in a corporation, a proceeding which is exclusively a matter of statutory regulation; but this is a suit against the corporation itself, upon whom, if there were no statute, there could be a sufficient service at common law. If then, it is impossible to comply with the statutory mode of service, and independently of the statute, there might be a good service at common law, it will be sufficient to have made such service.

      C. C. Tyler and R. D. Smith, for the defendants,
    contended, 1. That the Killingworth Manuf. Co., formed under the general act of the legislature of this state, relating to joint stock corporations, was, at the time of the service of the plaintiff’s writ, on the 22d of March, 1849, dissolved as a corporation, and its corporate powers had been surrendered.
    2. That a corporation, created for manufacturing purposes, may be dissolved, without the consent of the legislature, or any judicial process ; it being merely a partnership, possessing limited corporate power. Slee v. Broom & al. 19 Johns. R. 456. Briggs v. Penniman, 8 Cowen, 387. Brinckerhoff v. Brown, 7 Johns. Ch. R. 217.
    3. That if not dissolved, its charter had become forfeited, when Nathan Griswold purchased and became the soleowner of all the capital stock of the corporation.
    4. That if it existed as a corporation, at the time of the service of the plaintiff’s writ, it existed by force of the law under which it was created, which prescribes the mode of service; and service, to be legal, must be made in strict conformity to that mode. Rand v. Upper Locks, &c. 3 Day, 441. McCall v. Byram Manuf. Co., 6 Conn. R. 428.
    5. That the corporate book, which contained the entry of the vote of the company, passed on the 15th of March, 1849, was admissible evidence, for the purpose of proving the resignation of the directors and secretary of the company. Highland Turnpike Co. v. McKean, 10 Johns. R. 154. Wood v. Jefferson County Bank, 9 Cowen’s R. 194. 205. South School District v. Blakeslee, 13 Conn. R. 227. Denning v. Roome, 6 Wend. 651.
    6. That if the corporate book was not admissible evidence, for the purpose of showing the resignation of the officers of the corporation, then the parol evidence must prevail.
   Ellsworth, J.

Several questions have been discussed in this case, which we have no occasion to decide ; for in one particular, we all agree, that the plea in abatement is bad, and must be overruled.

The superior court found, that the acts of said manufacturing company and its officers, five days only before the service of the plaintiff’s writ, were done to “ prevent the attachment, of the company’s properly,'’ claimed to be fraudulently conveyed away from their creditors. With this finding, it is impossible to allow those acts to possess any efficacy whatever. If such a flimsy device were to receive the sanction of the court, we should lend our aid to insolvent corporations to secrete their effects from creditors. If service cannot be made, as in this case, by leaving a copy with Wm. C. Net-tleton, the late secretary, it can never be made at all. Perhaps equity might give relief; but even then, service of the writ is essential on some one ; but no other service could be made, substantially better than this which is made.

We consider the secretary, who was in office up to the 15th of March, as continuing in office on the 19th, notwithstanding his fraudulent resignation, which we consider no resignation at all.

Besides, were it necessary, we should probably hold, that as Nathan Griswold had then become the sole stockholder, there being, on the defendants’ hypothesis, no directors, nor secretary, nor place of business, a service of the writ on him, such as was in fact made, would be sufficient.

The question of the admissibility of the recorded vote of the 19th of March, showing the resignation of the clerk, becomes unimportant, in the view we take of that transaction. We are, however, inclined to think the paper vote is admissible in evidence. No new secretary was appointed ; and if the last cannot record the acceptance of his own resignation, it cannot be recorded at all; and this admitted act of the company, can have no existence, because there is no technical proof in the record. And if, indeed, such be the case, it can avail nothing to the defendants; for if there is no proof of the acceptance of the resignation, the old secretary remains in office, and can be treated as if nothing had been done.

We think it proper for a succeeding clerk when there is one, to record the resignation of his predecessor; but too much technicality must not be required in this matter; for it may be asked, what is the exact time when a clerk ceases to be in office ? Is it when he resigns, or when his resignation is accepted, or after its acceptance is recorded, and so becomes complete ? It is a common practice for corporate bodies to choose a presiding officer before there is any clerk to make a record ; the clerk, when chosen, is often sworn into office, by this presiding officer ; and yet the clerk can make a record of these transactions. If, when chosen, he is present to attest what was done, or knows the truth of what he records, he may make a valid record ; and this is all that is generally required in this state. A more precise rule would be attended with much inconvenience.

The further claim, that the defendants ceased to be a corporation after their vote of the 15th of March, because their charter then became extinct, by the resignation of their officers, and the omission to elect others, is wholly inadmissible. Whether mere disuse of any or all corporate power, works a determination of corporate being and corporate liability, we need not say ; though we believe it would be difficult to maintain the affirmative of the proposition. According to numerous decisions, the franchise should be formally surrendered to the legislature who gave it. In case of forfeiture, the legislature can retake it, by a judicial proceeding on a qua warranto.

We advise that judgment be given for the plaintiff.

In this opinion the other Judges concurred.

Judgment for plaintiff.


author: Church, Ch. J.

text:
    Burrows against Holt and others.
    New-London,
    July, 1850.
    In December, 1794, A executed a deed of a parcel of land to B and six other persons, described “as trustees of the Methodist Society; habendum to said grantees, in their capacity aforesaid of trusteesthe cestui que trust being an unincorporated association. In 1848, B became the sole survivor of such grantees; his title under the deed having never been extinguished, by any release or other act of his, After the grant, the Methodist Society used and occupied the granted premises, for more than fifteen years, in support and furtherance of the object contemplated by the deed. In an action of ejectment, brought by B, against members of the Methodist Society, assuming to act officially, it was held, 1. that B and the other grantees had a freehold estate in the premises of such a duration as was necessary to effect the purposes of the trust; 2. that the title of B had not been divested, by the occupation of the defendants ; such occupation not having been adverse to B's title.
    This was an action of ejectment, to recover the seisin and possession of a tract of land in New-London, with a meetinghouse standing thereon ; of which, the plaintiff averred, he was, on the 1st of April, 1848, well seised and possessed, as trustee for a certain association of Christians, called and known by the name of the Methodist Society of New-London, and so continued until the 20th of August, 1848, when the defendants entered and ejected him.
    The cause was tried, on the general issue, at Norwich, March term, 1850.
    On the trial, the plaintiff claimed title to the demanded premises, by virtue of a deed, dated the the 16th day of December, 1794, from Timothy Green, to Daniel Burrows, Rickard Douglass, George Potter, Peter Griffin, Isaiah Bolles, Luther Gale and John Shepard, described “ as trustees in behalf of the Methodist Society, so called, in New-London:” habendum “to said grantees, in their capacity aforesaid of trustees for said Methodist Society in New-London, and their successors in said capacity and assigns, to their only use and behoof.” The deed contained the usual covenants, which were with the grantees, “and their successors, in the capacity of trustees as aforesaid.”
    The title of the plaintiff’s grantor and the disseisin and possession of the defendants, were not in dispute on the trial; it being admitted, that such grantor had title to the premises, and that the defendants had disseised the plaintiff, and were holding him out of possession at the time this action was brought, and that the plaintiff was the sole survivor of the grantees named in said deed.
    The defendants claimed to have proved, that all the grantees, named in said deed, had, more than fifteen years before the commencement of this action, ceased to act as trustees under said deed, or to claim any interest in or title to, or controul over the premises ; that, as the original trustees named in said deed died, or removed from New-London, or ceased to act as trustees, the remaining trustees, from time to time, supplied, by their own appointment, other persons to be trustees, in the place and stead of those so dying, removing or ceasing to act; and thereupon the persons so appointed claimed to be trustees for the Methodist Society named in said deed, and acted in that capacity, and from time to time, as they saw occasion therefor, closing the meeting-house on the premises and excluding therefrom the preachers at such times preaching in said house.
    The defendants offered further evidence to prove, that about forty years ago, the plaintiff removed from New-London, where he then resided, to Hebron, and thence afterwards to Middletown, where he has ever since resided, having never since such removal from New-London, asserted any right, title or interest in, or exercised any controul over, the premises, until the commencement of this action ; that in the year 1830, difficulties existing in said society, as to the use of the meeting-house, by preachers then preaching there, and the number of persons acting as trustees being then less than seven, the plaintiff was applied to, to exercise his power and authority and to act as one of the trustees, under said deed ; but he refused so to do, declaring that he had long since ceased to be a trustee, that another had been chosen in his stead, and that he had nothing more to do in the premises than though he had never been a trustee, and advising that new trustees, sufficient to make up the number of seven, should be supplied, by those who remained; that this was done ; and that it continued to be done, from time to time ; and that the defendants are in possession of the premises, as trustees so appointed.
    Under these circumstances, the defendants claimed, that by such relinquishment of the plaintiff, and such adverse holding, by those claiming to be and so acting as trustees, since the plaintiff removed from New-London, the title of the plaintiff to the premises was barred and lost; and that, if any relinquishment by deed of his title was requisite, to divest him of his title and interest in the premises, the jury, from the facts aforesaid, were authorized to presume such grant or relinquishment : and they prayed the court so to instruct the jury.
    The plaintiff denied, that there had been any adverse holding of the premises, as claimed by the defendants ; or that the plaintiff had made the declarations imputed to him ; and that there were any such facts proved as raised the presumption of, or authorized the jury to infer or presume the existence of, any grant or release of the premises, as claimed by the defendants ; and he claimed to have proved, that from the date of the deed from Timothy Green to the disseisin stated in the declaration, the premises had always been and were used and occupied solely by the Methodist Society mentioned in that deed, for whose use they were granted ; that such use and occupation was always under and in accordance with said deed ;and that said society had always worshipped in said house, under the ministration of preachers of their order and denomination, and by the sufferance and permission of the grantees named in said deed and their survivors, and of the plaintiff, while he was the sole survivor, and without interference or obstruction from the trustees named in said deed, or those elected as aforesaid, or any of them, or any other person, during all said time.
    The court charged the jury, that the legal title to the premises might be divested, either by an adverse possession for fifteen years or upwards, on the part of those from time to time elected or acting as such trustees, or by a release from the plaintiff; that whether such title was divested, in either of those modes, were questions of fact for the jury to determine ; that although vacancies occurring in the number of the original trustees, or among those whom they elected to fill such vacancies, were supplied, by those who remained, by the election of persons who were called trustees, and those persons so elected had claimed to be such trustees and acted as such ; yet if the persons so elected had, by the sufferance or permission of the plaintiff, appropriated the property in question to the use, occupation and enjoyment of said Methodist Society, and for the purposes for which it was conveyed; this would not be such an adverse possession of the property, as that the plaintiff's title would be divested thereby; and that this would be the case, even if the plaintiff, or the persons so elected, believed, that, by such election of said persons, no conveyance having been made to such persons, they, the persons so elected, acquired the legal title to the property, and that the plaintiff became divested of it: But that, if the persons so elected took and held possession of the property, claiming title in themselves, and appropriated it to the use of those for whose use or benefit it was not conveyed by said deed, such possession would be adverse, and if continued for the period of fifteen years, would divest the title of the plaintiff. And in respect to the claim of the defendants, as to the right of the jury to presume a grant or relinquishment by deed from the plaintiff of his title, the court charged the jury in conformity with the claim of the defendants, leaving it for the jury to determine from the evidence, whether the plaintiff had been divested of his title, by an adverse possession, as claimed by the defendants, or by a grant, release or relinquishment by deed of such title.
    The jury found a verdict in favour of the plaintiff; and the defendants moved for a new trial for a misdirection.

      Strong and Lippitt, in support of the motion,
    contended, 1. That the provisions of the deed shewed, that the estate conveyed was designed to be held by the grantees, as officers of the Methodist Society. They are described in the deed as trustees of that society. Were there nothing to vary the effect in the subsequent part of the deed, and in the acts of the grantees under it, they might have taken a life estate; as in the ordinary case of a grant to an individual, without words of inheritance. But the habendum and subsequent parts of the deed, limit and qualify this grant. It is there provided, that the estate shall be held by them, in their capacity of trustees, and by their successors and assigns. The covenants, also, are with them and their assigns. The estate of the grantees, therefore, continued only so long as they sustained the office or place of trustees, and acted in that capacity ; it not being granted to them for their lives, by any express words. 4 Kent’s Com. 9. 2 Bla. Com. 109. Co. Litt. 27. a. Com. Dig. tit. Estates. A. 6.

      2. That it makes no difference, that when these trustees ceased to act, as such, and others were appointed in their place and stead, these successors did not, as such, acquire the legal title to the estate. Not vesting in them, it would revert to the grantor, or his heirs, until a court of equity should give title to the successors so appointed, if they have the right to demand it; as much so, whilst Burrows should be living, as after his decease.
    3. That if the title, as trustee, can be considered as remaining in Burrows, after he ceased to act as trustee, others being appointed and exercising all the power and authority over the premises, which did or could belong to him, as such trustee, for a period of over thirty years, he declaring that he had no title, and claiming none, the legal title of Burrows will be barred, by the statute of limitation ; or by the presumption of a release of his title, from such facts.

      McCurdy and Foster, contra,
    remarked, That it appeared from the motion and was admitted, that the deed of T. Green, in December, 1794, conveyed the legal title of the premises to the grantees named in the deed ; that the plaintiff is the sole survivor of those grantees ; and that the defendants, having disseised the plaintiff, are in possession holding him out. Under these circumstances, the plaintiff is clearly entitled to a verdict, unless it be shewn, that he was divested of his title, before the trial. He might have been divested, first, by a deed of release from himself; or secondly, by adverse possession of other persons, for fifteen years, or more. The counsel then contended,
    1. That there was no direct proof or claim that the plaintiff had given any deed of release ; and if otherwise, it was a question of fact, proper for the jury to determine, and was distinctly submitted to them, by the court.
    2. That the charge in relation to adverse possession, was equally unexceptionable. In the first place, the possession of the society, under the deed, for the uses mentioned therein, without the interference of the plaintiff, or any of the other trustees, was not an adverse possession. A possession pursuant to the grant, is not adverse. Hanchett v. King, 4 Day, 360, 2 Smith’s Lead. Ca, 413. & seq. Best on Presump. 154. & seq. Secondly, the court distinctly submitted to the jury for them to determine from the evidence, whether the - plaintiff had been divested of his title, by an adverse possession, as the defendants claimed.
   Church, Ch. J.

The only question left by the jury and to be decided here, is. whether the defendants have acquired a title to the demanded premises, by adverse possession ?

The plaintiff, as the sole survivor of the original trustees or grantees, has now the legal title to the property in question, unless he has, in some way, released it, or unless he has lost it, by the hostile occupancy of the defendants. But the jury has decided, that there has not been any voluntary relinquishment or release of title, either actual or presumed.

Timothy Green executed a deed to the plaintiff and others, as trustees of the Methodist Society in New-London. All the grantees but the plaintiff, are dead ; and thus he claims his title. The society, for whose use and benefit this deed was made, was not a corporate body, and could not appoint a board of trustees, with legal capacity, or who could have legal successors ; and nothing appears, on this record, showing that any such body had ever existed, or did exist, when the deed to the trustees was executed, under any appointment made by the society. It was but an ordinary deed of trust to the individuals named as grantees, for the only use and behoof of the Methodist Society, an unincorporated association. These grantees, therefore, were trustees only as the trust deed made them such. They had a freehold interest of such a duration as was necessary to effect, the purposes of the trust, and not limited to any contemplated continuance in office or power of the trustees, as officers of the society. This trust would continue, unless in some way renounced or extinguished, during the life-time, at least, of the persons designated as grantees. No duties were required of these trustees. They were passive, as trustees, constituted to preserve contingent remainders ; and the trust was created only to vest and preserve the legal estate, for the use of a body which could not take it. It was not, therefore, necessary to the creation of this trust, or to the continuance of the legal title in the trustees, that they should have been even members of the Methodist Society, or have taken an active part in its affairs, or have resided on the town of New-London where the society was located.

As the title originally in the plaintiff, as one of the grantees, has not failed, by any act of his ; has it been defeated, by the adverse possession of the defendants ? We think it has not.

If the defendants could have had a legal existence, as official trustees of the society, as they claim, they have not exercised their trust adversely to the title and capacity of the plaintiff, as grantee ; but in furtherance and support of the object of the same trust. They have not objected, but have permitted the Methodist Society to use and occupy the granted premises, in conformity with the grant; and so they have been occupied and used. If the defendants, or any predecessors, as agents of the association, have managed its concerns, although exclusive of the plaintiff’s interference, yet consistently with the purpose for which this grant was made, this can not conflict with the plaintiff’s legal title, but is entirely consistent with it. The defendants, although assuming to act officially, have in truth acted only as agents and private members of a voluntary association, and as such, have been in the use of the premises under the deed, and so have been confirming, and not defeating it.

If the Methodist Society had, or if the defendants or their predecessors had, acting as agents or trustees, diverted the property to a different use, in defiance of the trust, or appropriated it to a different religious community, or to a different charity ; such an use, if continued and uninterrupted for more than fifteen years, would have defeated the plaintiff’s title ; but as no such conflicting use has been made of the property, no adverse title to it has been acquired, and the defendants are without a legal defence to the action.

The views expressed by the Judge, at the trial, were correct ; and no new trial can be granted.

In this opinion the other judges concurred.

New trial not to be granted.