Allen v. Adams

• Decision Date: 18 February 1928
• Citation: 140 A. 694,16 Del.Ch. 77
• Court: Court of Chancery of Delaware
• Parties: CHARLOTTE A. ALLEN, v. FRANK B. ADAMS

140 A. 694

16 Del.Ch. 77

CHARLOTTE A. ALLEN, v. FRANK B. ADAMS

Court of Chancery of Delaware, Sussex

February 18, 1928

BILL TO ESTABLISH PRIORITY OF LIEN AND FOR INJUNCTION. On December 29, 1919, the complainant, a widow, sold her farm near Seaford to the defendant's son for six thousand dollars. The defendant is the complainant's brother. The defendant loaned his son fifteen hundred dollars with which a cash payment was made to the complainant, and the son executed a mortgage upon the farm purchased and a bond in the sum of forty-five hundred dollars to secure the balance of the purchase price. The complainant not knowing where to keep the bond and mortgage, asked her brother, the defendant, to keep the same for her after first having the mortgage recorded. The defendant took the two instruments, agreeing and promising to have the mortgage recorded as requested. Fourteen days later the defendant received from his son a judgment note in the amount of fifteen hundred dollars as security for the advancement he had made him to enable him to make the required cash payment. The defendant failed to cause the mortgage to be recorded as he had agreed. He held the complainant's unrecorded mortgage and the bond in his possession until August 6, 1926, at which time he delivered the same to the complainant at Rehoboth, Delaware. Five days thereafter, to wit, on August 11, 1926, the defendant caused judgment to be entered on his own judgment note for fifteen hundred dollars against his son, and thereby obtained a lien on the farm covered by the complainant's mortgage. The complainant caused her mortgage to be recorded a little less than a year later, viz., July 21, 1927.

The bill seeks a decree declaring the complainant's mortgage to be a lien senior to the defendant's lien by judgment and that the defendant be enjoined from collecting the amount of his judgment out of the mortgaged lands until after the full amount due upon said mortgage shall have been fully paid.

The cause was heard on bill, answer, oral testimony of witnesses before the Chancellor and exhibits.

Decree prepared in accordance with the prayers of the bill, with costs on the defendant.

Frank M. Jones and Daniel J. Layton, for complainant.

James M. Tunnell, for defendant.

OPINION

THE CHANCELLOR

The question presented by this case is--Can the defendant, under an agent's duty to secure for the complainant the recordation of a mortgage lien, refuse to perform that duty for fourteen days, at the end of that time obtain a judgment note in his own favor, and then, holding the complainant's mortgage and his own note off the record for over six years, surrender possession to his principal of the mortgage, within five days thereafter enter judgment on his own note ahead of the mortgage later entered, and retain the advantage thus gained?

The answer to this question may be one way or the other according as the defendant's conduct squares itself or not with the principle of loyalty to his principal and faithfulness to the trust which the relation assumed by him imposes. The defendant in this case was unfaithful in several particulars.

In the first place he should have caused the complainant's mortgage to be recorded very early in the fourteen day period. Had he done his duty in this regard, the conflict in his breast between duty to his principal and his own self interest which his subsequently obtained judgment note gave birth to, never would have arisen. The duty to record the mortgage promptly was so plain, that failure to perform it suspiciously indicates that the omission was designed to await the securing by the defendant of the promised judgment note.

In the second place, the defendant after obtaining the judgment note was faithless to the duty he owed to his principal in that he allowed over six years to go by, during which time he held the complainant's mortgage off the record. The fact that during that time he also held back his own judgment note does not in anywise minimize the degree of the wrong done to the complainant. In that period, he knew he could not enter his own note ahead of the mortgage and hope to retain the advantage of priority. He accordingly did nothing except this, to consult a lawyer (not his present solicitor) at the end of the period to find out how he might possibly slip his own lien ahead of his principal's, a possibility which his own protracted default had created.

Thus far, notwithstanding the defendant's failure to obey his duty, he might still have set himself free to act in conflict with his principal's interests, by surrendering possession of the mortgage to his principal and frankly informing her that he had not recorded it, that there was a judgment note in his own favor which he purposed to record and that she, if she desired priority, should promptly cause her mortgage to be recorded. The contest being solely between the complainant as principal and the defendant as agent, the serving of his own interests by the defendant after such an explicit repudiation of his agency and such a full disclosure of the facts, would not have constituted a breach of the obligation of loyalty which the theretofore existing relationship had imposed. The defendant contends that he did do these very things. Did he? That he surrendered the mortgage is admitted. Whether he told the complainant that the mortgage had not been recorded is a subject of conflict in the testimony. On this conflict, I find as a fact that all the defendant said to his sister, the complainant (who was sick in bed at the time) was this--"Here is your mortgage; there is nothing ahead of it." The defendant's long continued omission to record the mortgage, his refusal to do so on the very day he journeyed from Seaford to Rehoboth to surrender it notwithstanding he passed by the door of the court house where the recorder's office was located, his obtaining of legal advice upon how to place himself in position to get ahead of his principal, his gathering up of witnesses to watch him...