Alexander Shirras, John Black, William Milligan, William Blacklock Joseph Verrees v. John Caig Robert Mitchel

• Decision Date: 13 February 1812
• Citation: 11 U.S. 34,3 L.Ed. 260,7 Cranch 34
• Parties: ALEXANDER SHIRRAS, JOHN BLACK, WILLIAM MILLIGAN, WILLIAM BLACKLOCK, & JOSEPH VERREES, v. JOHN CAIG & ROBERT MITCHEL
• Court: U.S. Supreme Court

11 U.S. 34

7 Cranch 34

3 L.Ed. 260

ALEXANDER SHIRRAS, JOHN BLACK, WILLIAM MILLIGAN, WILLIAM BLACKLOCK, & JOSEPH VERREES, v. JOHN CAIG & ROBERT MITCHEL.

February 13, 1812

Absent Washington, justice.

ERROR to the Circuit Court for the district of Georgia, by Shirras and others original Complainants against Caig and Mitchel, original Defendants, in a suit in equity to foreclose a mortgage of a lot, houses and wharf in Savannah, called Gairdner's wharf, which were in the possession of the Defendants.

The mortgage was made on the 1st of December, 1801, by Edwin Gairdner, in his own name, and also as attorney for the Defendant, Caig, (but without any authority from Caig so to do,) to secure the payment of 130,000 sterling, for which E. Gairdner had, on the same day, executed a bond for himself and Caig.

In the year 1796, this property had been purchased by James Gairdner, Edwin Gairdner, and Robert Mitchel as joint tenants, who took a conveyance from Levi Sheftall to themselves, by the description of James Gairdner, Edwin Gairdner and Robert Mitchel, merchants and co-partners of the city of Savannah. The name of the firm was Gairdners and Mitchel. In 1799 this firm was dissolved, and the business was carried on in Charleston by Edwin Gairdner alone under the firm of Edwin Gairdner and Co.; and by mutual consent, in December, 1799, an entry was made in the books of Gairdners and Mitchel, by James Gairdner, charging this property, to the account of Edwin Gairdner and Co. at the price of 20,000 dollars. In 1800, Edwin Gairdner entered into partnership, with John Caig, the Defendant, at Savannah, under the firm of Edwin Gairdner and Co.—under which name he continued to carry on business alone at Charleston; and upon his books at that place, made an entry charging this property to the Savannah house (consisting of himself and Caig) at an agreed price; and the Savannah house by an entry on their books credited the same on the account of the Charleston house consisting of Edwin Gairdner alone.

On the 7th of January, 1802, Edwin Gairdner and John Caig dissolved their partnership at Savannah, and a new firm was established consisting of Edwin Gairdner, John Caig and the Defendant, Robert Mitchel, under the name of Gairdner, Caig and Mitchel, who by their articles of co-partnership under seal, agreed to take the property in question, at a valuation and hold it as their joint property.

Previous to this, viz. in March, 1800, Mitchel had by deed conveyed his third part of this property to Edwin Gairdner and John Caig, as joint tenants; and at the time of executing the mortgage (viz. December 1, 1801) Edwin Gairdner had full power and authority from James Gairdner to sell and convey his share of the property.

Subsequent to the mortgage, viz. on the 27th of July, 1802, Edwin Gairdner, as attorney for James Gairdner, by deed conveyed to Mitchel one third of the property, and by his own deed of the same date, he conveyed one sixth of the property to Caig, who had before received a conveyance of one other sixth from Mitchell.

These two last deeds were proved and recorded on the 14th of September, 1802.

The mortgage was proved on the 10th, and recorded on the 17th of September, 1802.

By the law of Georgia, deeds of bargain and sale are to be recorded in 12 months—and by a law of 1768, every mortgage and deed recorded within ten days after it's execution, shall have preference of other deeds and mortgages, not recorded within that period.

At the time of executing the mortgage, therefore, the legal title of three sixths of the property was in Edwin Gairdner, and according to the book entries of the several co-partnerships he was also equitably entitled to the same. The legal title of two sixths was in James Gairdner, and of the other sixth in Caig, who, according to the book entries was equitably entitled to three sixths; so that although Edwin Gairdner had a legal power to sell and transfer James Gairdner's two sixths, yet he was bound in equity to transfer them to Caig.

The complainants in their bill claim the whole. They state that Edwin Gairdner was the real bona fide owner of the property that the book entries were made only to give a credit to the Savannah house, and were without consideration—that the Savannah house was only to hold it in trust for Edwin Gairdner during the co-partnership. That Edwin Gairdner became bankrupt on the 3d of November, 1802, has received his certificate of discharge and that two of the complainants, Blacklock and Verrees, were duly appointed his assignees. That Caig and Mitchel, and the firm in which they are partners, are still largely indebted to Edwin Gairdner, who is also very largely indebted to the Complainants. And they pray that all conveyances, under which Caig and Mitchel claim to hold possession of the property, may be declared void and may be cancelled—that the property may be sold and the proceeds applied towards payment of the debts due to the Complainants—and for general relief.

The answers of Caig and Mitchell, the Defendants, do not admit that any thing was due by E. Gairdner to the Complainants on the 1st of December, 1801, the date of the mortgage, and suggest that if any thing was due it has since been paid off or otherwise settled. That Caig was made a party to the bond and mortgage without his authority and consent. That the bond and mortgage were carefully kept secret until the 13th of September, 1802. That it was not a regular transaction and ought not to avail against the Defendants, who are bona fide purchasers.

They set forth the several co-partnerships and entries in the books and aver that they and all the parties considered them as good transfers of the property which was always holden and considered as stock in trade. They deny all private, secret, or confidential trust for the benefit of E. Gairdner. They aver, that they believe, that at the date of the mortgage the Charleston house was indebted to the Savannah house, after allowing credit for the property in question.

In this state of the cause, the Defendants, Caig and Mitchel, filed a cross bill against the Complainants, Shirras and others, alleging secret transactions between them and E. Gairdner, and praying a discovery. They charge that the execution of the bond and mortgage was an act of hurry and despair, in the confusion and embarrassment of entangled circumstances, and at the eve of one of the greatest and most distressing bankruptcies. That the deeds were not signed until some weeks or months after their date. That no title papers were shown to the mortgagees, [they being all in the hands of Caig at Savannah] nor any authority from Caig to convey his interest. That the mortgage was taken without reflection or previous contemplation as to the security intended to be given, but as the last hope of saving or securing something from a person on the eve of insolvency. That the bond and mortgage were not executed for advances made, or money lent on the security, or hope of security arising from the mortgage, but with the intent to indemnify the mortgagees for endorsements at the banks in South Carolina for E. Gairdner, and for other collateral securities entered into for him; all which were settled and discharged by the exertions of E. Gairdner, and the resources he was then enabled to bring into activity. That there is no money due on the bond, or on the consideration for which the bond was given. That all the obligees have been fully paid, satisfied and indemnified, without having recourse to the mortgaged premises, and that the mortgage is kept up for speculating purposes, and to oppress Caig and Mitchel, or to cover some transaction between E. Gairdner and one of the obligees, subsequent to the execution of the mortgage and which has no relation to the same. That the mortgage was concealed from Caig and Mitchel for fear of injuring E. Gairdner's credit, and was not delivered to the mortgagees till some time before it was recorded; and was not recorded until Caig and Mitchel had paid a valuable consideration for two-thirds of the property and were in the quiet possession thereof, with the knowledge of the mortgagees. They claim title to two-thirds of the property under the various book entries of the several firms.

The bill then seeks a discovery of the day, and consideration on which the bond and mortgage were really executed; and whether the mortgagees had not notice of the claim of Caig and Mitchel. Whether the mortgagees gave notice of the mortgage to them, and requires Shirras and others to disclose the real debts, together with the particulars thereof, actually due from E. Gairdner, to each of them, at the date of the mortgage. It prays that the mortgage may be decreed to be fraudulent and void as to Caig and Mitchel, and for general relief.

The separate answers of the several Defendants, Shirras and others, to the cross bill, set forth minutely their several claims against E. Gairdner, and aver that the monies loaned and responsibilities incurred were upon the faith of the mortgage—except Wm. Blacklock, who did not know that he was included in the mortgage till some time after its date. Black in his answer produces on oath the plat referred to in the mortgage, which he says had remained with him ever since the execution of the mortgage.

They all admit that Caig and Mitchel were not notified of the mortgage, and that they knew of no authority from Caig to E. Gairdner to incumber his share of the property. They admit they did not see any title papers, and that they did not require them, having a perfect confidence in the representations and character of Edwin Gairdner. They deny that they had any knowledge of any transfer to Caig and Mitchel, except that E. Gairdner stated that Caig held one sixth. They admit that the mortgage was kept secret until the 10th September, 1802, lest it should injure the credit of the mortgagors. They aver that it was executed on the day of its date or...