Killoren v. Hernan

• Decision Date: 24 April 1939
• Citation: 20 N.E.2d 946,303 Mass. 93
• Parties: KILLOREN v. HERNAN et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

303 Mass. 93

20 N.E.2d 946

KILLOREN

v.HERNAN et al.

Supreme Judicial Court of Massachusetts, Suffolk.

April 24, 1939.

Suit in equity by Mary V. Killoren, administratrix of a decedent's estate, against Frances M. Hernan and the State Street Trust Company to exonerate from the lien of a pledge certain stocks and bank shares and a check deposited with defendant company by plaintiff's intestate for defendant Hernan's accommodation. From an interlocutory decree, confirming a master's report and overruling defendants' exceptions thereto, and a final decree for plaintiff, defendants appeal.

Affirmed.Appeal from Superior Court, Suffolk County; Kirk, Judge.

C. B. Cross, of Boston, for appellant Hernan.

J. S. Whipple, of Boston, for appellant State Street Trust Co.

W. A. Rollins, of Boston, for appellee.

RONAN, Justice.

This bill is brought to exonerate from the lien of a pledge certain stocks, bank shares and a check, which were deposited by the plaintiff's intestate with the State Street Trust Company, hereinafter called the company, for the accommodation of the defendant Hernan. The intestate in October, 1929, pledged these securities, or others for which the present securities have been substituted, when the company had requested the defendant Hernan to furnish more security upon her loan account. She contends that this security was given to her by the intestate; that they had engaged upon a joint enterprise; that his estate is liable for a part of the losses sustained and that the estate is also indebted to her for damages which she incurred in following his advice and in relying upon his promise that, if she did not liquidate her account with the company, he would reimburse her for any loss she might suffer. The company contends that it has the right to hold the collateral, which was pledged by both the intestate and the defendant Hernan, for the satisfaction of her two outstanding notes; and that two paid-up shares of a co-operative bank and a check were included in this collateral. The master has set forth in his report numerous financial transactions of the intestate and the defendant Hernan with each other and with the company; their relationship, and engagement of marriage in 1928; his presents to her; the circumstances under which he pledged his property, and his purpose and intent in aiding her; their conversations with each other and with others concerning the collateral; the correspondence with the company respecting her account and the consequent conduct of both the intestate and the defendant Hernan in reference to her account; the acquisition by her of an accident policy as security to him for any loss that he might sustain on account of the pledge; the substitution of collateral and the disposition of that which had been released; the various memoranda made by him concerning the collateral, which in some instances were written long after the events they purported to record; the failure of the intestate to require her to close the account; his changed attitude toward her during the last few years of his life; and the securing by her of a loan of $700 on the strength of the collateral held by the company, on the day following the death of the intestate, when she knew that he had died and knew that, if she informed the company of his death, ‘she probably would not be allowed to increase her loan.’ The activities of the intestate in dealing with the co-operative bank, which finally resulted in the issue of two paid-up shares and a check, both of which the company contends are included in the collateral, are fully narrated in the report. The case required careful weighing of evidence and accurate evaluation of testimony. The subsidiary findings of the master are numerous and apparently complete. They are consistent with each other and with the ultimate findings made by him. There is nothing in the report that would warrant our drawing any inferences that would support a conclusion different from that reached by the master upon the facts reported by him. His conclusions that the intestate made no gift of his collateral security to the defendant Hernan, that he did not agree to reimburse her for any losses she might suffer from continuing to carry the account, that the estate is not indebted to her, and that two shares of bank stock and the check are not held by the company as collateral, must be sustained. Dodge v. Anna Jaques Hospital, Mass., 17 N.E.2d 308.

There was no error in confirming the master's report, nor in overruling the exceptions of the defendants which in the main were based upon alleged errors in findings of the master or upon his failure to make certain findings. Zuckernik v. Jordan Marsh Co., 290 Mass. 151, 194 N.E. 892;Morin v. Clark, Mass., 6 N.E.2d 830.

The governing principles of the common law have been frequently applied by this court in actions at law when a defendant, standing in the position of a surety or a quasi surety, has contended that the creditor should have applied the security pledged for the debt or sued the principal debtor on his personal obligation before the surety could be called upon to pay. It is established in this Commonwealth that, in the absence of any agreement limiting the application of he security, a creditor is free to proceed in the first instance against the surety for the collection of his debt and is not required to exhaust every or any other remedy before doing so. Allen v. Woodard, 125 Mass. 400, 28 Am.Rep. 250;Wilson v. Bryant, 134 Mass. 291;Burnham v. Windram, 164 Mass. 313,41 N.E. 350;Hervey v. Rawson, 164 Mass. 501, 41 N.E. 682;Olds v. City Trust, Safe Deposit & Surety Co. of Philadelphia, 185 Mass. 500, 70 N.E. 1022,102 Am.St.Rep. 356;Mercantile Guaranty Co. v. Hilton, 191 Mass. 141, 77 N.E. 312;Miller v. Levitt, 226 Mass. 330, 115 N.E. 431;Tourtellotte v. Saulnier, 267 Mass. 361, 166 N.E. 879;Silverstein v. Saster, 285 Mass. 453, 189 N.E. 540. It is equally well established that a creditor holding collateral security for the payment of several loans may apply the proceeds in such manner as will be most beneficial to him. Richardson v. President, etc., of Washington Bank, 3 Metc. 536;Wilcox v. Fairhaven Bank, 7 Allen 270;Fall River National Bank v. Slade, 153 Mass. 415, 26 N.E. 843,12 L.R.A. 131;Boston Safe Deposit & Trust Co. v. Manning, 211 Mass. 584, 98 N.E. 509;Exchange Trust Co. v. Hitchcock, 249 Mass. 547, 144 N.E. 373;Thibert v. Morello, 277 Mass. 286, 178 N.E. 516. In all such instances, the principal debtor has no power to direct the creditor as to the manner in which the collateral shall be applied and the surety is equally lacking in such power. It may be that one reason for permitting the creditor full power to employ all available remedies for the collection of his debt is that the surety can protect himself by paying the creditor and by being subrogated to his rights as against the principal debtor. Wilson v. Bryant, 134 Mass. 291;Washburn v. Hammond, 151 Mass. 132, 24 N.E. 33.

The plaintiff, however, has not paid the claims of the company. She does not seek any remedy by subrogation. She is endeavoring to have her property relieved, in part at least, from being applied by the company in satisfaction of its claims. It is clear that, since the intestate has permitted the defendant Hernan to pledge his property for her sole benefit, his administratrix could, in equity, compel her to pay the debt if she is financially able, and thus release the property of the estate from the pledge. Browne v. Bixby, 190 Mass. 69, 76...