Cotton v. Atlas Nat. Bank
| Decision Date | 07 September 1887 |
| Citation | 145 Mass. 43,12 N.E. 850 |
| Parties | COTTON, EX'r v. ATLAS NAT. BANK and another. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
E.R. Hoar and G.W. Estabrook, for plaintiff.
There is to be decided in this case the question of the authority of the judge before whom the case was heard, and who reserved it for this court, to discharge the reservation and reopen the case; for this determines how much of the evidence reported is before the court. See Pub.St. c. 151, § 20; Taft v. Stoddard, 141 Mass. 150, 6 N.E. 836. "The report takes the place of an appeal." See Pub.St. c. 151, § 13; Cobb v. Rice, 128 Mass. 11. "As soon as the appeal is claimed and entered before a single justice, the cause is at once pending before the full court." On a reservation, it is submitted that, as soon as the case is reserved, it is pending before the full court, and can be treated only by the full court. It is only in special cases of accident or mistake "that the full court may grant leave to parties to exhibit further evidence." Pub.St. c. 151, § 26.
The plaintiff claims that in this cause no special case of accident or mistake is shown, and that no leave has been granted to exhibit further evidence. If the court declines to consider the additional evidence, or regards it as not affecting that first exhibited, then it appears: (1) Either the note for $50,000, dated December 27, 1877, has been paid or (2) the time of payment has been extended, or the note renewed or its terms changed.
As to F.B. Cotton's knowledge. Since the transaction related to his own debt, and the bank knew it, it was put on its inquiry as to whatever related to the known property of others, and he could not prejudice Mrs. Cotton's rights or the rights of the estate as executor or as general agent by any unauthorized acts. Shaw v. Spencer, 100 Mass. 382. If the note has been paid, of course the securities are released from the pledge, and they must be returned and accounted for. Assuming that the note was extended or renewed, the result is the same. When one pledges or mortgages his property to secure the debt of another, to one who knows the fact, the pledgee, to the extent of the property pledged, stands in the position of a surety or guarantor; and any act which would discharge him as such will release the pledged or mortgaged property as if it were such surety or guarantor. Mitchell v. Roberts, 17 F. 776; Christner v. Brown, 16 Iowa, 130; Rowan v Manufacturing Co., 33 Conn. 1; Ryan v Trustees, 14 Ill. 20; White v. Ault, 19 Ga 551; Robinson v. Gee, 1 Ves.Sr. 251; Bank v. Payne, 19 Grant, Ch. 180; Lord Harberton v. Bennett, Beat. 386; Bowker v. Bull, 1 Sim. (N.S.) 29.
Whenever a debt is extended, renewed, or altered in its terms, without the consent of a surety or guarantor thereon, he is discharged, and the court will not inquire whether the renewal, extension, or alteration is to his advantage or not. Huse v. Alexander, 2 Metc. 157; Greely v. Dow, Id. 176; Appleton v. Parker, 15 Gray, 173; Gifford v. Allen, 3 Metc. 255; Horne v. Bodwell, 5 Gray, 457; Veazie v. Carr, 3 Allen, 14; Brooks v. Wright, 13 Allen, 72. Even if the old note had been retained by the bank, taking the new note, payable at a later time, extended the time of payment, disabled the bank from suing Mr. Cotton before the expiration of the extended time, and released the property pledged. Appleton v. Parker, 15 Gray, 173; Brooks v. Wright, 13 Allen, 72; Gifford v. Allen, 3 Metc. 255. The debt was consolidated with another. The bank received other money of the estate, and should account therefor. See Shaw v. Spencer, 100 Mass. 382.
As to the position of the parties. Mr. Cotton was not agent for Mrs. Cotton to borrow this money. The bank knew Mrs. Cotton was either the principal or the pledgeor of stocks for the note of her son. In either event the contract contained in the note could not be changed without her consent. The transaction was not for Mrs. Cotton's benefit. If Mrs. Cotton was ever liable to Mr. Cotton or the bank, that liability is discharged. Mr. Cotton has lost any right to indemnification from Mrs. Cotton. The note was not discounted for Mrs. Cotton. It is well-settled law that the bank cannot offer evidence to show that she was principal, and sue her on the note, but is bound by the terms of the note. The present attempt of the bank is merely an effort to obtain the same advantage by indirection, and is within the mischief the rule is intended to prevent. Slawson v. Loring, 5 Allen, 340; Barlow v. Congregational Soc., 8 Allen, 460; Manufacturing Co. v. Fairbanks, 98 Mass. 101. If Mr. Cotton had authority from Mrs. Cotton to renew or extend notes or pledge stocks, that authority terminated with her decease, with notice of which the bank is affected, and any subsequent renewal or extension discharged the securities pledged. Giving the consolidated note discharged the security.
A.L. Soule and Geo. M. Stearns, for defendants.
The justice sitting at the hearing in this case determined that all the conditions upon which the granting of the defendant's motion depended existed. The question presented under that branch of the case is as to his power to do so. The reservation of the case was an order or decree in an equity case which the justice might modify, vacate, or enlarge at any time, under the general powers given in section 12, c. 151, Pub.St., and in section 20. Section 13 applies only to appeals. In such cases the action of a party has intervened under a right given by statute independent of the control or action of the court, and perhaps beyond the power of the court to change. Exceptions allowed in chancery may be amended. Daniell, Ch.Pr. (4th Ed.) 764; Dolder v. Bank of England, 10 Ves. 284; Northcote v. Northcote, 1 Dick. 22. "All interlocutory decrees are considered as resting in minutes until final decree is made and recorded." Gibson v. Crehore, 5 Pick. 146-156; Park v. Johnson, 7 Allen, 378. At law, exceptions have frequently been amended after allowance, by consent of parties, and upon hearing, by the judge who allowed them. But if the single justice could not reopen the case for further hearing, this court can. The additional evidence is of grave importance. The case involves a large sum of money, and the single justice determined that there were no laches or fault which deprive defendant of the benefit of the testimony. If the court is of the opinion that the power did not obtain in the single justice to grant the motion, the defendant here and now asks that the same be granted. Perry v. Breed, 117 Mass. 155.
Upon all the evidence, the defendant asks the court to find that the plaintiff's testatrix had such an interest in the loan made in the name of Frank B. Cotton that she cannot in equity assert that her stocks were pledged by Frank B. Cotton as her agent, acting for her in that behalf, and in her interest; also that the form of the note, as the debt of Frank B., was a mere matter of convenience, and that in reality the transaction was for her; also that she knew the original note was not paid, and understood that her stocks were held by the bank as collateral to the renewals, and assented thereto. The defendant asks this court to so find upon the evidence in this case, direct and circumstantial.
Apart from the effect as evidence of a complete understanding by the executors that the loan from the bank was Mrs. Cotton's, the defendant claims that the executors should be estopped, by receiving the benefits of the collateral pledged to Frank by Hunt, from asserting that the transaction was that of Frank B. It was all one transaction. Either the loan from the bank and to Hunt of this $50,000 was Frank's business or his mother's. The money was undoubtedly borrowed to lend Hunt, and all constituted one transaction. Hunt gave the 150 shares of South Boston Iron-Works stock as collateral to the person who borrowed the money for and lent it to him. He was president of the bank, and all parties understood the borrowing from the bank and the lending of the proceeds as one transaction. The executors cannot repudiate one part of the transaction, and adopt the other. Otherwise the executors may receive the proceeds of the Hunt collateral without the slightest right or reason. The executors chose to treat the whole transaction, according to the truth, as Mrs. Cotton's, and sold the Hunt collateral to the $50,000 note, and kept the proceeds. The plaintiff was not ignorant of the question involved. He knew the proceeds were in dispute, but he kept the same, keeps them now, and appropriates them "as any other money of the estate." No executor and no person in any capacity can accept a benefit and assert any claim contrary thereto. Phillips v. Rogers, 12 Metc. 405; Hapgood v. Houghton, 22 Pick. 480; Watson v. Watson, 128 Mass. 152; Smith v. Wells, 134 Mass. 11; Shurtleff v. Ferry, 138 Mass. 259.
The facts all show conclusively that the renewals were not intended as extinguishments of the original debt, and that neither party expected or intended the stocks should be discharged of the pledge. The whole transaction was an ordinary one of the repeated renewals of a note upon the same terms as the first discount. The stocks were sold as of right by the bank and dividends collected. Whether the new notes given operated as payment of the original debt, or as renewals of the evidence thereof, and whether the security pledged for the payment of the debt was discharged, is to be determined by ascertaining the intention of the parties. If there was no express agreement, this intention is to be found from the circumstances attending the case. Grimes v Kimball, 3 Allen, 518; Taft v. Boyd, 13 Allen, 84; Watkins v. Hill, 8 Pick. 522; Pomroy v. Rice, 16 Pick. 22; Green v. Russell, 132...
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