Island Pond National Bank v. Alfred Lacroix

• Decision Date: 04 February 1932
• Parties: ISLAND POND NATIONAL BANK v. ALFRED LACROIX ET AL
• Court: Vermont Supreme Court

158 A. 684

104 Vt. 282

ISLAND POND NATIONAL BANK v. ALFRED LACROIX ET AL

Supreme Court of Vermont

February 4, 1932

February Term, 1932.

Equity---Time for Filing Bill of Exceptions---G. L. 1511 1561---Mortgages---Specific Finding of Fraud Unnecessary Where Facts Found Conclusively Show Fraud---Right of Mortgagee To Rely upon Mortgagor's Representations When Discharging Mortgage---Harmless Error---Bills and Notes---G. L. 2918---Transfer without Indorsement---"Holder for Value"---"Bearer"---Lost Instruments---Debt Evidenced by Lost Note as Nonnegotiable Chose in Action---Effect of Assignment of Mortgagee's Interest in Mortgaged Premises Unaccompanied by Assignment of Mortgage Indebtedness---Relation of Debt and Mortgage to Each Other---Pledge--- Rights Acquired by Pledgee---Property Remaining in Pledgor---Delivery as Essential to Valid Pledge---Corporeal Property and Choses in Action---Effect of Transfer, without Indorsement, of Note Secured by Mortgage, Payable to Order of Person Other Than Transferer---Necessity of Written Assignment of Mortgage Indebtedness To Make Pledge Effective---Fraud or Mistake in Cancellation of Mortgage, and Intervening Liens---Bona Fide Purchaser as Question of Law or Fact---Pledgee's Standing as to Priority---Doctrine Protecting Bona Fide Purchaser for Value without Notice---Determination of Rights of Parties Claiming by Equitable Title---Insufficiency of Assignment of Mortgage Alone To Transfer Legal Title or Interest in Mortgage Indebtedness---Equitable Lien Created by Failure of Contract of Pledge for Want of Delivery of Article Agreed To Be Pledged---Status of Such Equitable Lien and Senior Mortgage---Merger of Estates by Giving Deed to Mortgaged Premises---Pleading Bona Fide Ownership of Nonnegotiable Chose in Action and When and How Acquired---Cross-bill To Restore or Preserve Lien of Mortgage Cancelled by Fraud or Mistake.

1. Provision of G. L. 1561, limiting time within which appeal in chancery may be filed to twenty days from date of decree, has no application to bill of exceptions covering exceptions taken on trial before chancellor, since under G. L. 1511 party excepting to findings of chancellor has thirty days from day final decree is filed in which to file his exceptions.

2. Failure of chancellor to find that mortgagee was induced by fraud of mortgagor to discharge first mortgage and note and take another mortgage and note, held without error, where only possible conclusion from findings made by chancellor was that such fraud had been practiced and had induced action taken by mortgagee.

3. Mortgagee, discharging first mortgage and accepting new mortgage upon mortgagor's assurances that intervening mortgage on premises had been paid and discharged, was not required to make any inquiry or to examine records, but was entitled to rely upon such representations.

4. Implied finding by chancellor that mortgagor had made written assignment of mortgage and indorsed note at time he sold and delivered them to purchaser, held unsupported by evidence, but harmless, since neither party so claimed.

5. Where negotiable note, payable to payee or order, was sold and delivered to purchaser by payee without indorsement under G. L. 2918, such title as payee had therein vested in purchaser, but latter did not become "holder in due course," nor "bearer," note not being payable to bearer.

6. Purchaser for value of negotiable note payable to payee or order, which was delivered to him without indorsement, by thereafter having payee indorse note could become "holder in due course" as of time of indorsement under G. L. 2918.

7. When negotiable note, payable to payee or order, which had been delivered to purchaser without indorsement, was lost, debt evidenced by note became nonnegotiable chose in action, transferable only by written assignment.

8. Mortgagee's assignment of his "right, title, interest and estate" in and to mortgaged premises, unaccompanied by transfer of mortgage indebtedness, conveys at most only bare legal title to mortgaged premises without any beneficial interest therein.

9. In case of mortgage securing payment of debt, debt is principal thing, and mortgage incident to it which accompanies and follows debt wherever debt may be assigned.

10. Mortgage expires when debt is paid.

11. When note and mortgage are made at same time and in relation to same subject, they are to be construed together as if they were parts of same instrument, and defense to one is defense to other.

12. When personal property is pledged, pledgee acquires only special property in thing pledged with right to retain possession and control of it until debt for which it is pledged is paid or has otherwise been discharged.

13. General title to pledged property remains in pledgor.

14. Actual delivery of thing pledged to pledgee is essential to validity of pledge.

15. In pledge of corporeal property, delivery of property to pledgee without written transfer of title is sufficient to pass requisite special property.

16. Choses in action, being incapable of manual delivery, cannot, as against third parties without notice, be pledged without written transfer of title, which performs office of delivery of possession on pledge of corporeal property.

17. Where negotiable note secured by mortgage was sold and delivered by payee to third person, without indorsement, mortgage also being delivered without assignment, and, sometime after mortgage had been recorded, such third person lost both note and mortgage, whereupon he procured certified copy of record of mortgage and had it assigned by original mortgagee, and also secured new note from maker of original note, payable to original payee, and subsequently delivered new note, without indorsement, and assigned mortgage, to plaintiff bank as collateral security for loan, held that plaintiff was not thereby vested with any title to mortgage indebtedness.

18. It is essential to pledge of mortgage indebtedness that there be written assignment thereof to pledgee; otherwise pledge cannot take effect.

19. Mortgagee, who by reason of fraud or mistake takes new mortgage for old one, not in payment, but in continuation of old indebtedness, and cancels old mortgage without knowledge of intervening lien, although such lien is recorded, will not be held to have subordinated his security to intervening lien, in absence of intervening rights of innocent third parties, if, at time senior mortgage is cancelled, holder of intervening lien had actual or constructive knowledge of same.

20. Where senior mortgagee was induced by fraud to cancel first mortgage, and take new note and mortgage in continuation of original mortgage indebtedness, and had no intention of relinquishing or destroying priority of his senior lien, equity will recognize and uphold such priority over lien of transferee of intervening mortgage, which expressly stated that it was subject to first mortgage, since such transferee has suffered no wrong, but remains in full enjoyment of all his rights.

21. Whether person is bona fide purchaser is usually mixed question of law and fact, but where facts have been found, it is question of law for court.

22. Upon question of priority, pledgee stands on same footing as purchaser, and is deemed holder for value to extent of lien.

23. Where pledgee receives possession of pledged property from pledgor in good faith, he is deemed bona fide purchaser, and takes priority over outstanding equities.

24. Delivery of possession in case of corporeal property or written assignment in case of nonnegotiable chose in action is requisite to give pledgee legal title and interest sufficient to control and dispose of pledged property, and to invoke rule protecting bona fide purchasers.

25. Doctrine protecting bona fide purchaser for valuable consideration without notice of existing equities is applicable solely to purchaser of legal title or interest.

26. Purchaser of equitable title, only, takes it subject to all countervailing equities to which it was subject in hands of his vendor.

27. Where two parties claim by equitable title, one who is prior in time is deemed better in right.

28. Assignment of mortgage as collateral for loan without written assignment of mortgage indebtedness, held not to transfer any legal title or interest in mortgage indebtedness to assignee.

29. Mortgage, as incident to mortgage debt, is inseparable from it, has no separate existence, and cannot be treated as independent chose in action.

30. Contract for pledge, which fails for want of delivery of article agreed to be pledged, creates equitable lien, valid between parties, and enforceable against property in hands of original contractor, his heirs, administrators, executors, voluntary assignees, and purchasers or encumbrancers with notice, but not against creditors having prior lien on property.

31. Bank, taking assignment of mortgage as collateral security, but failing to obtain written assignment of mortgage indebtedness, held to have equitable lien enforceable against assignor of mortgage, but inferior to that of holder of senior mortgage cancelled through fraud.

32. Where mortgagor executed and delivered quitclaim deed of mortgaged premises to holder of mortgages thereon, in absence of finding that merger was intended, and it being apparent that best interests of mortgagee required two estates to be kept separate, held that there was no merger.

33. Party claiming to be assignee and bona fide owner of nonnegotiable chose in action, who seeks to foreclose mortgage securing same, should allege that he is bona fide owner thereof, and set forth when and how he acquired title thereto.

34. In foreclosure proceedings, as a rule, defendant who by reason of fraud or mistake, takes new mortgage in...