Commonwealth v. Reading Sav. Bank

• Decision Date: 10 July 1884
• Citation: 137 Mass. 431
• Parties: Commonwealth, by Commissioners of Savings Banks, v. Reading Savings Bank. Arthur W. Austin, petitioner
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

137 Mass. 431

Commonwealth, by Commissioners of Savings Banks, v. Reading Savings Bank. Arthur W. Austin, petitioner

Supreme Court of Massachusetts, Suffolk

July 10, 1884

Argued November 21, 1883 [Syllabus Material] [Syllabus Material] [Syllabus Material] [Syllabus Material]

Upon an application made by the commissioners of savings banks, under the St. of 1866, c. 192, § 5, the Reading Savings Bank had been enjoined from the further continuance of its business, and receivers had been appointed to take possession of its property and effects, for the purpose of settling its affairs.

On February 17, 1882, Arthur W. Austin filed a petition in the case, alleging the following facts:

On November 29, 1871, one David F. Weston conveyed in mortgage certain land in Reading to the Reading Savings Bank, by a deed in the usual form of a power of sale mortgage, and containing a covenant that the grantor was lawfully seised in fee simple of the granted premises, and that they were free from all incumbrances. This deed was drawn and witnessed by, and acknowledged before, C. P. Judd, who was at that time a trustee of said bank. The consideration expressed in the deed was $ 5000, and it was given to secure a promissory note of that amount.

On May 14, 1878, the bank, by its treasurer, Nathan P. Pratt, assigned the mortgage and note and debt to the petitioner, and received, as consideration for the same, the principal and interest then due. The interest on said note was paid to the petitioner to November 1, 1878, by said bank, and no longer. On April 30, 1879, the petitioner took quiet, peaceable, and unopposed possession of said land for the purpose of foreclosing said mortgage, on account of a breach of condition therein contained, namely, the non-payment of principal and interest, and on May 5, 1879, the receivers of the bank took possession of the land, claiming so to do by virtue of a mortgage for $ 1550 on the land, alleged to have been given by Weston to the bank, dated May 16, 1870. The assignment to the petitioner was made with the full assurance of the treasurer of the bank that there was no prior incumbrance.

The prayer of the petition was that the mortgage of $ 1550 be declared not to take precedence of the petitioner's mortgage; and, if it did take precedence, that the petitioner be allowed to redeem the same.

On April 11, 1882, the petitioner filed a supplemental petition, alleging that on or about May 14, 1878, Nathan P. Pratt, the treasurer of the Reading Savings Bank, applied to the petitioner to purchase and take a transfer of the $ 5000 mortgage given by Weston, and of the note secured thereby, and showed to the petitioner, at his request, a vote of the trustees of the bank, authorizing the treasurer to discharge, assign, and release all mortgages belonging to the bank; that thereupon it was agreed between the petitioner and Pratt, as treasurer, that the bank should execute and deliver an assignment of said mortgage deed, and transfer said note to the petitioner, upon payment by him to the bank of a sum equal to the principal and interest then due on the note; that the petitioner paid said sum to the bank, and the bank executed and delivered to the petitioner an assignment, and a transfer of the note; and that it appeared that the execution of the assignment was of doubtful validity, and might be insufficient to pass the legal title to the land.

The prayer of this petition was, that the receivers be ordered to reform the assignment, by executing and delivering to the petitioner a sufficient assignment; and for further relief.

Annexed to this petition were copies of the assignment, and of the mortgage note, as follows:

"Know all men by these presents, that the Reading Savings Bank, a corporation under the laws of Massachusetts, and the owner of a certain mortgage given by David F. Weston to said Reading Savings Bank, said mortgage dated November twenty-ninth, a. d. 1871, and recorded with Middlesex South District Deeds, libro 1189, folio 136, in consideration of five thousand dollars paid by Arthur W. Austin, of Milton, county of Norfolk, esquire, the receipt whereof is hereby acknowledged, do hereby assign, transfer, and set over unto the said Arthur W. Austin the said mortgage deed, the real estate thereby conveyed, and the note and claim thereby secured.

"To have and to hold the same to the said Austin and his heirs and assigns, to their own use and behoof forever; subject, nevertheless, to the conditions therein contained, and to redemption according to law.

"In witness whereof, I, Nathan P. Pratt, treasurer of said corporation, by vote duly authorized, hereto set my hand and seal this fourteenth day of May, a. d. 1878.

"Reading Savings Bank, [seal ]

by N. P. Pratt, Treasurer."

This assignment purported to be acknowledged before a justice of the peace, on May 14, 1878, by "Nathan P. Pratt, treasurer, in his official capacity," as "his free act and deed," and to be recorded on March 25, 1879.

"$ 5000.

Reading, November 29, 1871.

For value received, on demand, I promise to pay to the order of the Reading Savings Bank, a corporation, five thousand dollars, with interest at the rate of seven and three tenths per cent per annum, payable semiannually until said principal is paid.

"David F. Weston.

"Attest: C. P. Judd.

"Secured by a mortgage duly stamped."

On the back of the note was written: "Without recourse to Reading Savings Bank. N. P. Pratt, Treasurer."

The receivers appeared and filed an answer, admitting the making of both the mortgages by Weston to the bank; and alleging that said mortgages were the property of the bank and of the receivers. They admitted that they had taken possession under the first mortgage, and for the purposes alleged in the petition, and that they intended to apply the rents and profits to the last mortgage or other indebtedness of Weston to the bank. They alleged that the first mortgage was a valid and outstanding security, and that the debt secured thereby had in no part been paid. They denied that Pratt had any power or authority vested in him to sell or assign said mortgage or said note; but alleged that whatever was done by Pratt was done without the knowledge or consent of the trustees or board of investment of the bank, and that no money received by Pratt from the petitioner ever came into the possession of the bank, and that no title or right came to the petitioner by reason of any acts of Pratt done in the premises; and that all his acts were unlawfully and fraudulently done for the purpose of defrauding the bank; and prayed that the petitioner be ordered to reassign said mortgage to them, to be held by them in their capacity as receivers.

The case was heard by W. Allen J., who found the following facts:

The Reading Savings Bank was incorporated by the St. of 1869, c. 393, "with all the powers and privileges, and subject to all the duties, liabilities, and restrictions, set forth in all general laws which now are or may hereafter be in force in this Commonwealth, relating to institutions for savings."

The by-laws of the bank provided that the officers of the corporation should be a president, a vice-president, a treasurer who should also be the secretary, and a board of trustees thirteen in number; and that there should be a board of investment consisting of three persons. The duties of the secretary and treasurer, prescribed by the by-laws, were as follows:

"It shall be the duty of the secretary to notify all meetings of the corporation, or of the board of officers, either by written, printed, or personal notices. He shall keep a full, complete, and just record of all meetings of the corporation, or of the board of trustees, in a book belonging to the corporation, and shall at all times submit it to the inspection of members of the board, and such record shall be held in proof of the votes and transactions of the corporation.

"It shall be the duty of the treasurer, with such assistants as he may be authorized by the board of trustees to employ, to attend at the bank during bank hours, to enter all deposits and payments made to depositors in the books of the bank, and a duplicate of such entry in the book of the depositor, which shall be his voucher, and the evidence of the amount deposited. It shall also be his duty to lay before the board of managers, at their semiannual meetings, a statement of the concerns of the institution, which shall be examined and certified by a committee appointed for that purpose at the annual meeting of the corporation. The treasurer shall have charge of all books of accounts, moneys, papers, bonds, mortgages, and other writings of security, and property belonging to the bank, and shall be responsible for their safe keeping. He shall draw all necessary papers, and discharge all obligations of the corporation, and his signature shall be binding upon the corporation. He may pay the current bills of the corporation as they accrue, never exceeding the amount of appropriation previously made by a majority of the board of investment, saving only the expenses necessarily incurred in the commencement of the business of the corporation previous to the adoption of these by-laws. He shall keep a complete record or file of vouchers for all his payments, and shall exhibit the same at any time to any member of the board of trustees for his vindication."

Nathan P. Pratt, the secretary and treasurer of the Reading Savings Bank, offered to sell the $ 5000 mortgage and note to the petitioner, saying that the mortgage was a first or a bottom mortgage, and that it was so good that the bank, which then expected a panic, would wish to buy it back again, and to this the petitioner assented; and for that reason the petitioner...