Clark v. Roberts
| Decision Date | 25 June 1910 |
| Citation | 92 N.E. 461,206 Mass. 235 |
| Parties | CLARK v. ROBERTS et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
John B. O'Donnell, for plaintiff.
J Weston Allen, Allen & Weyburn, and Gardner & Gardner, for respondents.
This case comes before us on a report.
It appears from the report that just before March 7, 1905, the plaintiff was the holder of six notes aggregating $6,700 secured by a second mortgage on a lot of land and a building thereon situate in Holyoke. The first mortgage was $6,000 and the property was assessed for $11,600. These notes were signed by the defendant Winkler as maker of them and were payable on the 1st day of January in successive years up to and including January 1, 1911. On March 7, 1905, the plaintiff delivered these notes indorsed in blank to the defendant Roberts and assigned to him the mortgage conditioned for the payment of them. The plaintiff's claim was that these notes and the mortgage securing them were transferred and assigned as collateral security for a loan of $1,000 then made by Roberts to the plaintiff. He testified that he agreed to pay Roberts a bonus of $200 for making the loan and 6 per cent. interest on the whole sum of $1,200. Roberts' claim was that he bought the $6,700 mortgage notes for $1,000.
The interest, amounting to $167.50, due on July 1, 1905, was paid by Winkler to Roberts at that time. One note for $1,000 and the interest due thereon and the interest due on the balance of the mortgage debt (amounting to $142.50) was also paid by Winkler to Roberts on January 1, 1906. The plaintiff testified that on February 22, 1906, he wrote to Roberts stating that the sums received by him on the collateral more than paid the amount due under the loan, asking for a return of the 'papers' and a check for the balance. To this the plaintiff received no answer. Roberts testified that he never received it. The plaintiff testified that he called at Roberts' office a number of times during the next eight months, but never found him there. The mortgage interest (amounting to $142.50) was paid by Winkler to Roberts on July 2d. The plaintiff finally found Roberts at his office on December 17th. Roberts then claimed that the plaintiff sold him the mortgage notes and this bill was filed on the same day. The plaintiff testified that Roberts told him at this interview on December 17th that he then had the mortgage notes in his possession and never had assigned them. On the advice of his attorney the plaintiff had made a search in the registry of deeds in November and found that there was no record there of an assignment of the mortgage. But it appears that on December 21, 1905 (a year before the bill in equity here in question was filed), Roberts executed an assignment of the mortgage to the defendant Baker and acknowledged it on that day. This assignment never has been recorded. The plaintiff amended his bill in January, 1907, by adding an allegation on information and belief that the defendant Baker had the mortgage notes and mortgage in his possession and that he 'claimed them as his own.' By a subsequent amendment allowed in June, 1907, the plaintiff alleged that 'at and before the time of the alleged sale by said Roberts to said Baker, said Baker knew or had reasonable cause to believe that said notes and mortgage were not the absolute property of said Roberts and that they were the property of the plaintiff and held by said Roberts as security only.'
On motion of the plaintiff three issues were framed to be tried by a jury, namely: (1) Was the transfer by the plaintiff to Roberts an absolute sale? (2) Was that transfer made as collateral security for money lent by Roberts to the plaintiff? and (3) If the transfer was made as collateral security, 'did the defendant Baker, at the time of or before the assignment of said notes and mortgage to him by said Roberts, know or have reasonable cause to believe that notes and mortgage were held by said Roberts as collateral security?'
At the trial of these issues the jury answered the first in the negative and the other two in the affirmative.
Thereafter the cause was sent to a master to find the amount due the plaintiff 'based upon the verdict of the jury,' and on June 1, 1908, he reported that amount to be $222.63.
On October 20, 1908, the defendant Baker filed a motion that a decree be entered dismissing the bill as against him on the ground that the fact that he had reasonable cause to believe that Roberts held the notes and mortgage as collateral security did not deprive him of his standing as a bona fide purchaser for value without notice. Thereupon the plaintiff asked to be allowed to prove that the defendant Baker had 'actual knowledge' of that fact. The defendant Baker objected to this unless all the findings of the jury were vacated. The judge ordered a hearing on the issue of Baker's 'actual knowledge,' without vacating the jury's findings and reserved Baker's rights raised by his objection to that course of proceeding.
The case was then heard on this issue by the same justice who presided at the trial before the jury. The result of this hearing was a finding that Baker had 'actual knowledge' of the fact that Roberts held the notes and mortgage as collateral security when they were assigned to him.
An order was made for a final decree (1) declaring that the notes and mortgage belong to the plaintiff; (2) directing Baker to return the notes to the plaintiff and Roberts and Baker to execute and deliver to him an assignment of the mortgage; (3) directing Roberts and Baker to pay to the plaintiff $222.62 and interest thereon from July 1, 1906, and his costs of suit; and (4) directing the plaintiff to pay to the defendant Winkler $50 for his costs and attorney's fees.
Since the findings were made by the jury Baker alone has made any defense to the suit. The questions submitted to us by this report are: (1) The refusal of the judge to dismiss the bill as against Baker on the findings of the jury; (2) the right of the judge to hear the issue of 'actual knowledge' at the time he did and without vacating the answers of the jury; (3) whether the evidence warranted the finding made; and (4) various rulings on the admission of evidence.
Baker is right in his position that the bill alleging in the alternative 'actual knowledge' or 'reasonable cause to believe' did not state a case. 'Reasonable cause to believe' that his assignor had no title is not inconsistent with a purchase in good faith without notice of that fact. Pierce v. O'Brien, 189 Mass. 58, 75 N.E. 61. Baker is also right in his position that the finding of the judge left the matter where it was left by the allegations of the bill. But when in a suit in equity the findings of a jury do not dispose of all the issues necessary to a decision of the suit, the proper course is for the judge to hear the remaining issues unless on application he in his discretion should frame further issues to be tried by a jury. This rule applies to the situation in this case. Doubtless in an action at law it would have been necessary to set aside the findings by the jury. But that is not the case in a suit in equity unless the further hearing is on a fact inconsistent with the finding by the jury. That was not so in the case at bar.
The other question submitted to us are questions raised by rulings on evidence and the question whether the evidence warranted the finding made, namely, that Baker had 'actual knowledge.'
It seems to have been assumed that since the defense of a purchase for...
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