Capitol Nat. Bank & Trust Co. v. David B. Roberts, Inc.

• Decision Date: 23 June 1942
• Citation: Capitol Nat. Bank & Trust Co. v. David B. Roberts, Inc., 27 A.2d 116, 129 Conn. 194 (Conn. 1942)
• Court: Connecticut Supreme Court
• Parties: CAPITOL NAT. BANK & TRUST CO. v. DAVID B. ROBERTS, Inc., et al.

27 A.2d 116

129 Conn. 194

CAPITOL NAT. BANK & TRUST CO.

v. DAVID B. ROBERTS, Inc., et al.

Supreme Court of Errors of Connecticut.

June 23, 1942.

Appeal from Superior Court, Hartford County; Comley, Judge.

Action by the Capitol National Bank & Trust Company against David B. Roberts, incorporated, and another, on a note executed by named defendant and endorsed by other defendant, wherein defendants filed a counterclaim for an accounting and other relief and the issues were tried to the court. From a judgment for plaintiff on the complaint and counterclaim, defendants appeal.

Error and new trial ordered.

Before MALTBIE, C. J., and AVERY, BROWN, JENNINGS, and ELLS, JJ.

Harry M. Albert and Michael V. Blansfield, both of Waterbury, and A. A. M. Schweitzer, of Hartford, for appellants (defendants).

W. Arthur Countryman, Jr., of Hartford, for appellee (plaintiff).

MALTBIE, Chief Justice.

The plaintiff brought this action to recover on a note for $2,500 made to it by the defendant corporation and indorsed by the defendant David B. Roberts. We shall not attempt to treat separately the two defendants but shall refer to them indiscriminately as the defendants. The trial court gave judgment for the plaintiff to recover the amount of the note plus an attorney's fee provided in it, with a deduction of a certain amount which it had received because of collateral it held. The defendants have appealed.

As to the underlying facts, the defendants do not attack the finding in any material respect. Dominic Fazzano was, on April 15, 1929, indebted to the plaintiff in the amount of $21,836.19 on account of loans made by it to him and the discount of notes of which he was the payee. The plaintiff requested him to give it security for this debt and he executed to Edward F. Dustin, acting for the plaintiff, a note and mortgage in the sum of $25,000 upon certain real estate he owned. This mortgage was in the usual form of a mortgage to secure a note for $25,000 and made no reference to the fact that it was collateral security for Fazzano's real debt to the plaintiff. The only consideration for this mortgage was Fazzano's indebtedness to the plaintiff and its forebearance as regards his default on the debt. From time to time thereafter Fazzano made payments on the debt. Before May 13, 1931, the plaintiff discounted for Fazzano a note for $3,200 made to him by one Finlay, and thereafter both he and Finlay made payments on this note.

The defendants had sold to Fazzano a certain piece of real estate on which was a mortgage; they continued to be liable on it; Fazzano became in default with respect to the payments due on it and, to protect the defendants, he conveyed to them the property he had mortgaged to the plaintiff. The deed stated that the property was subject to this mortgage "upon which there is an unpaid balance of Twenty-one Thousand Eight Hundred (21,800) Dollars." The deed did not contain an agreement to assume the mortgage, but in a separate instrument, which also recited that $21,800 was due on it, the corporation assumed and agreed to pay that sum $1,800 in cash and $2,500 every six months thereafter until the whole was paid. The plaintiff placed upon this instrument its written acceptance. Roberts, in the course of the negotiations which resulted in this transaction, had inquired of both Fazzano and the plaintiff's treasurer as to the amount due on the mortgage, and both had assured him that $21,800 was due, and the assumption agreement was signed in the belief that this was so. The defendants paid the plaintiff the $1800 in cash due on the acceptance of the assumption agreement. Thereafter the defendants made payments on account of this agreement to the plaintiff but did not fully comply with its terms. On September 27, 1933, at the suggestion of the president of the plaintiff, another agreement was made between it and the defendants by which they were to pay it $6,000 in full settlement, $3,500 in cash and the balance to be represented by a note in the amount of $2,500. The cash was paid and the note made and the plaintiff delivered the Fazzano note and mortgage to the defendants with a release of the latter. The defendants gave the plaintiff, as security for the note it then made, certain shares of stock and a second mortgage upon certain real estate which the holder of the first mortgage subsequently acquired by foreclosure. The note for $2,500 was renewed from time to time and the defendants paid interest on it, but the plaintiff finally refused further renewals and the note in suit is the last one made.

Before proceeding further with a discussion of the facts, we should premise this. Under the finding of the court, Fazzano's mortgage to the plaintiff was intended to secure his then existing indebtedness to it; it was not a mortgage to secure any debts arising in the future. Fazzano's obligation on account of the Finlay note would not be included in it. Indeed, the exhibits and evidence make it clear that the plaintiff regarded that note as creating an indebtedness by Fazzano distinct from that which the mortgage was intended to secure. Although the mortgage stated the sum due to be $25,000, it was a lien only to the amount of the existing indebtedness. Thomas v. Scougale, 90 Wash. 162, 169, 155 P. 847, Ann.Cas.1918C, 452; Grennon v. Kramer, 111 N.J.Eq. 337, 340, 162 A. 758. Hill v. Banks, 61 Conn. 25, 23 A. 712, and First National Bank v. National Grain Corporation, 103 Conn. 657, 131 A. 404, relied on by the plaintiff, do not hold to the contrary; in both there was an actual indebtedness equal to the sum stated to be due in the collateral mortgage. As the mortgage was a lien only to the amount of the indebtedness, payments made to reduce that indebtedness would equally reduce the amount due on the mortgage.

The trial court made various findings as to the amounts due the plaintiff at the time the different transactions occurred and as to its method of dealing with the matter. The defendants seek corrections in regard to these matters. Many of these transactions are substantiated beyond dispute by the terms of the instruments made to and accepted by the plaintiff, by a statement of account which its treasurer during the period in question, appearing as its witness, testified to be correct and by oral testimony he gave, or uncontradicted testimony of a nature such that if it was not true the plaintiff would naturally have disputed it and which is supported by inferences irresistible in the absence of explanation. Without taking up the matters involved in detail, the further findings of the court must be corrected to state these facts: Although the Fazzano mortgage was merely collateral security for his indebtedness to the plaintiff, when Fazzano made payments toward the discharge of that indebtedness many of them were not applied to reduce the mortgage. When the defendants took the conveyance from Fazzano and assumed the mortgage, instead of $21,800, which the plaintiff and Fazzano informed the defendants was the amount due, Fazzano's entire indebtedness to the plaintiff was $11,237.67, in which was included $1,600 still due on the Finlay note. At the time of the final...