Blennerhassett v. Sherman

• Decision Date: 01 October 1881
• Citation: 105 U.S. 100,26 L.Ed. 1080
• Parties: BLENNERHASSETT v. SHERMAN
• Court: U.S. Supreme Court

105 U.S. 100

105 U.S. 100

26 L.Ed. 1080

BLENNERHASSETT v. SHERMAN.

October Term, 1881

APPEAL from the Circuit Court of the United States for the District of Iowa.

The bill in this case was filed Jan. 26, 1875. The suit was brought to foreclose a mortgage executed by Allen, lately of the city of Chicago, in the State of Illinois, to Allen, Stephens, & Co., of the city of New York, a firm composed of Allen, the mortgagor, and Stephens and Blennerhassett. The bill of complaint set out the mortgage in full, as follows:——

'NEW YORK, 18 Nov., 1874.—I hereby acknowledge the receipt of four hundred and sixty-five thousand four hundred and seventy-six and 88-100 dollars of advance to the Cook County National Bank, of Chicago, for my account, same being made by Allen, Stephens, & Co. in money, paper, and indorsements. I have arranged with them for additional advances. In consideration thereof I hereby grant and convey to Allen, Stephens, & Co., by way of mortgage and security for such advances, all my real estate of every kind and description, and wherever situated.

'B. F. ALLEN.'

This instrument was duly acknowledged by Allen before a notary public inthe city of New York, and delivered to the notary public in the city of Blennerhassett. It was not recorded until Jan. 19, 1875. On that day it was filed for record in Cook County, Illinois, and on the next day in Polk County, Iowa.

The bill charged 'that in consideration of said security the complainants had further advanced to said Allen in money and valuable securities, and become personally liable by indorsement of securities for said Allen, in the further sum of four hundred and thirty-four thousand five hundred and twenty-three dollars and twelve cents, making a total amount of advancements and indorsements on account of said security of the sum of $900,000, paid and advanced by your orators, and for which they became liable as indorsers.' The bill then gave a description of the real estate which complainants claimed was covered by the mortgage, and prayed for an account of the moneys advanced by the complainants to Allen, and the moneys paid by them on account of the liabilities incurred and the amounts intended to be secured by the mortgage, and for a foreclosure of the same, and general relief.

On Feb. 8, 1875, the mortgage mentioned in the bill was assigned by Allen, Stephens, & Co. to the Charter Oak Life Insurance Company of Hartford, Conn., and on April 17 that company, leave of the court having been obtained allowing it to intervene and become a party complainant, filed a supplemental bill, in which the assignment of the mortgage was averred. A petition in bankruptcy was filed Feb. 23, 1875, against Allen in the United States District Court for the District of Iowa. He was adjudged a bankrupt April 22, and on July 1 following Hoyt Sherman was appointed assignee of his estate.

On Aug. 7, 1875, Stephens and Blennerhassett, and the Charter Oak Life Insurance Company, filed their bill of review, in which they prayed that Hoyt Sherman, the assignee of Allen, might be made a party defendant. Allen was retained as a defendant on account of a claim of homestead which he set up to certain of the property covered by the mortgage.

In this bill, which is called in the record 'a bill of revivor and consolidated bill,' the complainants averred, that prior to the date of the mortgage Allen had applied to Stephens and Blennerhassett, as copartners in the firm of Allen, Stephens, & Co., in behalf of the Cook County National Bank, to make to the bank, upon his credit and responsibility, certain large advances of money, commercial paper, and indorsements, and that in pursuance of such application Allen, Stephens, & Co. did make such advances to the amount of $465,476 prior to the date of the mortgage, and that after its date 'they continued to make advances of money and valuable securities to the said Cook County National Bank, at the request of said Allen, and between the said date of the 18th of November, 1874, and the date of the suspension of payment by the said Cook County National Bank, as hereinafter set forth, in addition to the said sum of four hundred and sixty-five thousand four hundred and seventy-six 88-100 dollars, ascertained and acknowledged to have been received at the date of said mortgage, the said Allen, Stephens, & Co. advanced in the aggregate the sum of two million seven hundred and twenty-two thousand two hundred and eighty-four and 29-100 dollars.

'That said Cook County National Bank from time, to time, between said dates, to wit, between the said eighteenth day of November, 1874, and the eighteenth day of January, 1875, made remittances to the said firm of Allen, Stephens, & Co., on account of said advances, which remittances were made in currency and in bills receivable, on which currency was realized, and all of which was applied on account, and was sufficient to extinguish and did extinguish wholly the amount so advanced prior to the date of the execution of said mortgage, but was wholly inadequate to pay the amount advanced subsequent to said date. That the balance due on account of said advances and in excess of the credits and remittances aforesaid, on the said eighteenth day of January, 1875, and still due and unpaid, is the sum of nine hundred thousand dollars.'

Sherman, the assignee, filed his answer to this bill, in which he averred that the advances made by Allen, Stephens, & Co. prior to the date of the mortgage were made to Allen on his own individual account and for his own use, and not to the Cook County National Bank, but denied that such advances amounted to the sum of $465,476, 'or anything like that amount.' He admitted the execution of the mortgage, but charged that on and prior to its date Allen was largely indebted to persons and banks in New York City and to the Cook County National Bank; that he was insolvent, his liabil- ities were more than $1,500,000, and exceeded his assets by at least $600,000; that the Cook County National Bank was embarrassed and unable to pay its debts; and that all these facts were then well known to Stephens and Blennerhassett. That they, desiring to take advantage of the necessities of Allen, and desiring to extort from him a mortgage on his real estate in Iowa and elsewhere, in fraud of his other creditors, falsely represented to him that he was largely indebted to the firm of Allen, Stephens, & Co., for advances theretofore made to the Cook County National Bank for his account, 'and that if he, Allen, would execute to said firm an agreement or mortgage as hereinbefore mentioned, said firm of Allen, Stephens, & Co. would advance, or procure to be advanced, to him an amount that would be sufficient to enable him and the said Cook County National Bank to go on with their business, and that they would continue to make such advances till he and the said bank had gotten over their crippled financial condition, and were able to go on with their business without such assistance; and that if he, the said Allen, would do so, that the same should not be put upon record, and should not in any manner be uttered or published; that it should be held by said Stephens and Blennerhassett, and should be kept from the knowledge of all the general creditors of said Allen, and of said Allen, Stephens, & Co.; that the only use they would make of it would be as a justification to their depositors for making such advances to said Allen, and then only in case any question should be made with them, the said Stephens and Blennerhassett, by such depositors in regard thereto; and that it should in no way or manner have any force or validity, even between the said parties thereunto, unless the said Allen, Stephens, & Co. should advance to said Allen funds sufficient to enable him and the said Cook County National Bank to go on with their business, as above stated, and then that it should be held by them, the said Stephens and Blennerhassett, and in no way used without the consent of the said Allen.

'They further declared to Allen that if he refused to execute said mortgage they would at once cease to make advances to him or the Cook County National Bank, and would take no steps to protect the drafts drawn by the Cook County National Bank on New York, which would cause its suspension. That Allen being in great need of money, and relying on the representations of Stephens and Blennerhassett, and believing that if he could procure the aid which they promised he could sustain the Cook County National Bank and pay off his debts, and fearing lest Stephens and Blennerhassett would carry out their threats, executed said mortgage.'

The answer averred that Allen, Stephens, & Co., on and before Jan. 18, 1875, refused to make the advances, upon the making of which alone said mortgage was to have any validity or effect, even between the parties thereto, and said firm in other respects failed to comply with the promises made, upon the faith of which the said mortgage was executed. That in consequence of the refusal and failure of Stephens and Blennerhassett to comply with their promises, Allen and the Cook County National Bank were compelled to and did suspend payment, and to quit business and go into liquidation, and so it was averred that the said mortgage became null and void.

The answer denied that, after the execution of the mortgage, Allen, Stephens, & Co. continued to make advances to the Cook County National Bank; denied that there was due from Allen or the Cook County National Bank to Allen, Stephens, & Co. the sum of $900,000, and averred that Allen and the Cook County National Bank had paid and delivered to Allen, Stephens, & Co., in money and securities, sufficient to satisfy all the advances of said firm to Allen and the Cook County National Bank, if any such were made.

It was further averred in the answer as follows:——

'That on and prior to the eighteenth day of November, 1874, the date of said pretended...