Locke v. New England Brick Co.

• Decision Date: 06 February 1906
• Citation: 63 A. 178,73 N.H. 492
• Parties: LOCKE et al. v. NEW ENGLAND BRICK CO. et al.
• Court: New Hampshire Supreme Court

63 A. 178

73 N.H. 492

LOCKE et al.

v. NEW ENGLAND BRICK CO. et al.

Supreme Court of New Hampshire. Rockingham.

Feb. 6, 1906.

Transferred from Superior Court; Stone, Judge.

Suit, by Alonzo E. Locke and others, as receivers of the New England Brick Company, against the New England Brick Company and others. Transferred from the superior court. Case discharged.

Bill in equity, to determine the claims of the parties to the proceeds of certain property sold by agreement. Transferred without a ruling from the superior court. The plaintiffs are the receivers of the New England Brick Company appointed by the United States Circuit Court and the trustees under a mortgage executed by that corporation. The defendants are the brick company and some of its creditors who attached wood and bricks as the property of the corporation prior to the appointment of the receiver. The plaintiffs claim that the attached property was included in a mortgage given by the brick company in November, 1801, which, after particularly describing the real estate of the corporation, continued as follows: "All its other property, present and future, real and personal, lands, rights of way, equipment, machinery, and other chattels, incomes, franchises, rights, privileges, titles, interests, choses in action, patents, easements, patent rights, and licenses of every kind and nature, whether the same are now owned or shall hereafter be acquired by the brick company." The mortgage was not made to delay creditors, but was given in good faith to secure the payment of bonds issued by the brick company. At the time it was made, the parties contemplated that the mortgagors should retain possession of the mortgaged property and continue the manufacture and sale of bricks until default, and that they should in this way dispose of and use all the wood and bricks they had on hand and such as they should thereafter acquire, for their own benefit, without accounting to the mortgagees for the proceeds. The mortgagors carried on this business in this way until February, 1904, when the other defendants brought suits and attached the wood and bricks as the property of the mortgagors. As soon as this was done a receiver was appointed, who sold the attached property and now holds the proceeds under an agreement to apply them as the property should have been applied.

Sargent, Remick & Niles, John Kivel, George T. Hughes, and Edmund S. Cook, for plaintiffs. Arthur O. Puller, Eastman, Scammon & Gardner, Louis G. Hoyt, and Felker & Gunnison, for defendants.

YOUNG, J. Unless the brick company was authorized to mortgage after-acquired property by chapter 66, p. 554, Laws 1901, the plaintiffs cannot recover. Pierce v. Emery, 32 N. H. 484. If foreign corporations are included within the operation of this statute (In re Prime, 136 N. Y. 347, 32 N. E. 1091, 18 L. R. A. 713), it will be unnecessary to decide whether the rule, that, when a mortgage of after-acquired property is in all other respects valid, equity will sustain it as against the mortgagors, and all those claiming through them, who either knew or ought to have known of the mortgage when their cause of action accrued—the rule for which the plaintiffs contend (Holroyd v. Marshall, 10 H. L. Cas. 191; Mitchell v. Winslow, 2 Story, 630, Fed. Cas. No. 9,673)—prevails in this jurisdiction (Pierce v. Emery, 32 N. H. 484, 506), for, at the time the mortgage was made, the brick company was authorized by statute to mortgage after-acquired property. So if the parties had wished, they could legally have included within its operation, not only any wood and bricks then on hand, but also any they should acquire while the mortgage was in force; and it would be valid, not only against the mortgagors, and those claiming through them with notice of the mortgage, but also against all the world, if the mortgage were properly recorded. Consequently, this mortgage would be valid in so far as the defendants are concerned, even if the parties intended that it should cover all the wood and bricks that the mortgagors should subsequently acquire, unless it is voidable for other reasons.

A mortgage of personal property is invalid as to subsequent attaching creditors, when there is an understanding between the parties, either at the time the mortgage is made (Wilson v. Sullivan, 58 N. H. 260), or later (Putnam v. Osgood, 52 N. H. 148); that until there is a default the mortgagors shall retain possession of the mortgaged property and use it or dispose of it for their own benefit without accounting to the mortgagees for the proceeds. Hodgdon v. Libby, 69 N. H. 136, 43 Atl. 312; Wilson v. Sullivan, 58 N. H. 260; Putnam v. Osgood, 52 N. H. 148; s. c., 51 N. H. 192; Coolidge v. Melvin, 42 N. H. 510; Ranlett v. Blodgett, 17 N. H. 298, 43 Am. Dec. 603. This is also the rule in most of the states. See 5 Am. & Eng. Enc. Law 995, and 6 Cyc. 1104-1120, where the authorities are collated. If it is true, as the plaintiffs contend, that the weight of authority is opposed to this rule, and that the reasons which have been given for sustaining it are illogical or even absurd, it is a sufficient answer to say that the rule is "too firmly established in our jurisprudence to be reversed by judicial action." Thompson v. Esty, 69 N. H. 55, 63, 45 Atl. 566; Hodgdon v. Libby, 69 N. H. 136, 43 Atl. 312; Mandigo v. Healey, 69 N. H. 94, 45 Atl. 318; Sanborn v. Wilder, 68 N. H. 471, 41 Atl. 172; Janelle v. Denoncour, 68 N. H. 1, 44 Atl. 63; Watkins v. Arms, 64 N. H. 99, 6 Atl. 92; Stratton v. Putney, 63 N. H. 577, 4 Atl. 876; Parsons v. Hatch, 63 N. H. 343; Gerrish v. Gerrish, 63 N. H. 128; McDonough v. Prescott, 62 N. H. 600; Sanborn v....