Newell Brothers v. Zuar Hanson

• Decision Date: 04 January 1924
• Citation: 123 A. 208,97 Vt. 297
• Parties: NEWELL BROTHERS v. ZUAR HANSON
• Court: Vermont Supreme Court

123 A. 208

97 Vt. 297

NEWELL BROTHERS v. ZUAR HANSON

Supreme Court of Vermont

January 4, 1924

April 1923.

ACTION OF TORT for fraudulent concealment of an encumbrance. Plea general issue. Trial by jury at the June Term, 1922 Caledonia County, Moulton, J., presiding. Verdict and judgment for the plaintiffs. The defendant excepted. The opinion states the case.

Judgment affirmed.

W. W. Reirden and David E. Porter for the defendant.

Present: WATSON, C. J., POWERS, TAYLOR, SLACK, and BUTLER, JJ.

OPINION

TAYLOR

The action is tort to recover damages for the alleged fraud of the defendant in the sale of a pair of horses. Trial was by jury with verdict and judgment for the plaintiffs. The defendant argues exceptions to the admission of certain evidence, to the overruling of his motion for a directed verdict, and to certain portions of the charge.

The defendant is the son of C. H. Hanson, now deceased, who in his lifetime was engaged in buying and selling horses, and at the time of the sale in question was employed by his father in that business. It appeared in evidence that in December, 1918, C. H. Hanson had sold this pair of horses then known as the Hodgdon horses, to one Chesley taking his note for $ 325, in part payment therefor. The note was payable to C. H. Hanson or order on demand, and contained the recital that the note was given for the horses, describing them, conditionally sold and delivered by Hanson to Chesley, and that the property was to remain the property of said Hanson, and subject to his control at all times until the note was wholly paid. The so-called lien note was duly recorded. February 26, 1919, the Barton Savings Bank and Trust Company bought the note from Hanson at its face value, and it was delivered to the bank bearing the latter's indorsement in blank. Two days later Chesley was notified by the bank that it held the note. Still later, and before March 28, 1919, Hanson and Chesley had a settlement in which the horses were sold back to Hanson, and the latter agreed to take up the note and send it to Chesley. This was not done. On the last named date, Charles Newell, one of the plaintiffs, had negotiations with the defendant for the exchange or purchase of a pair of horses. The defendant showed him the horses formerly sold to Chesley, which the plaintiffs finally purchased for $ 425, which represented their full value. They paid the defendant a part of the purchase price, and a few days later sent him a check drawn to him personally for the balance. The defendant turned over the purchase money to his father. C. H. Hanson was not present during any of the negotiations, and the plaintiffs' evidence tended to show that they were ignorant of the fact that he had any connection with the transaction. The plaintiffs were not told of the existence of the outstanding lien note, and bought the horses supposing they were free from encumbrance. C. H. Hanson died in February, 1920. The plaintiffs first learned of the existence of the lien note in June, 1920, when the bank instituted proceedings to enforce the lien. It placed the note in the hands of a deputy sheriff for collection with instructions to sell the horses if necessary. The officer demanded payment of Chesley and later of the plaintiffs, and, the same being refused, advertised and sold the horses at sheriff's sale in satisfaction of the lien note.

Several of the exceptions argued are, in one form or another, directed to the same question, and are not found to require separate treatment. It was not claimed that the defendant made any false statements inducing the sale. The fraud relied upon is the alleged fraudulent concealment of the fact that the horses were encumbered by the lien note then held by the bank. The principal claim in defense was that the transfer of the lien note to the bank did not transfer the legal title to the security; that the bank had no right as the assignee of the note to the lien on the horses, nor any right to foreclose the lien; and that the plaintiffs had not been disturbed in their possession of the horses by the defendant nor by C. H. Hanson, the holder of the lien, or any one representing him. In substance the defendant's claim is that the plaintiffs were not damaged by anything that he did, but by the wrongful act of the bank for which it alone would be liable. It is not claimed that the note in the hands of the bank was not a valid obligation, nor that the bank was not entitled to the standing of a holder in due course. On the contrary, the note was treated as valid, and it was conceded that the bank had an equitable interest in the security; but it was argued that such interest did not afford the basis of a legal proceeding in the name of the bank.

On the record we need consider only whether the defendant is excused on the theory that the foreclosure of the lien was unlawful. It is argued here that the blank indorsement of the note gave the bank no right to the lien reserved by C. H. Hanson and no interest in the property described in the note. However, the cases relied upon do not support this contention. In Batchelder v. Jenness, 59 Vt. 104, 7 A. 279, the owner of a farm had conveyed it to one Dunn, retaining in the deed a lien on the growing crops to secure certain notes given for the purchase money. The defendant, as sheriff, attached the crops on a writ in favor of a third party against Dunn. The plaintiff who had bought one of the purchase money notes, brought a suit in trespass and trover for the conversion of the crops, claiming to hold the same under the lien reserved in the deed of the farm. While it was there held that the assignee of a note, without any conveyance to him of the security except such as the sale of the note effected, could not maintain an action at law in his own name for the conversion of the security, it is made clear that by the purchase of the note the plaintiff acquired an equitable right in the crops, while the legal title thereto remained in the grantor of the farm, but was held by him for the plaintiff's benefit. Nor is the defendant's position supported by Buzzell v. Cummings, 61 Vt. 213, 18 A. 93. The action was trover for the recovery of a water wheel sold by the plaintiff to one Burton, for which the latter gave a note in part payment, and by a separate writing agreed that the water wheel was to remain the property of the plaintiff until the note was paid. The wheel was installed in a mill which later came into the possession of the defendant under a quitclaim deed. The note was discounted by Buzzell at the First National Bank of St. Johnsbury, and the lien writing was delivered to the bank without written assignment. Burton having failed to pay the note, the bank made demand for the water wheel, and on refusal sued in Buzzell's name for the conversion. In disposing of the claim that the suit could not be maintained in Buzzell's name it was held that there was not such a conveyance of the property itself by Buzzell as would enable the bank to maintain an action of trover in its own name--that there must be an actual conveyance of the security to the assignee in order that he may maintain an action in his own name for its conversion. But the case plainly recognizes the right of the assignee of such a note to institute and prosecute the appropriate action in the name of the holder of the legal title.

These cases accord with the rule generally recognized that, in the absence of any provision to the contrary, the unqualified assignment of a chose in action vests in the assignee an equitable title to all such securities and rights as are incidental to the subject-matter of the assignment. 2 R. C L. 633; Jenkinson v. New York Finance Company, 79 N.J.Eq. 247, 82 A. 36; Brainerd, etc., Quarry Co. v. Brice, 250 U.S. 229, 63 L.Ed. 951, 39 S.Ct. 458; Beaver Tr. Co. v. Morgan, 259 Pa. 567, 103 A. 367; Burke v. Wilson, 107 Wash. 454, 181 P. 904; Smith v. Wagner, 106 Misc. 170, 174 N.Y.S. 205. It does not avail the defendant that an action at law to enforce the assignee's rights under such an assignment would, in the absence of a statute to the contrary, have to be brought in the name of the assignor. Under the common law rule, the assignor is mere nominal party. The action could be prosecuted without his knowledge and even against his consent. Farmers & Mechanics' Bank v. Humphrey, 36 Vt. 554, 86 A. D. 671. But such was not the remedy pursued by the bank. Assuming that it had an equitable interest in the security, there was no apparent legal objection to the course pursued to enforce the lien. In such circumstances the plaintiffs would have no remedy against the bank as a wrongdoer. It could have justified the seizure and sale of the horses as assignee of the note, even if it acquired by the assignment only an equitable title. Smith v. Atkins, 18 Vt. 461; Batchelder v. Jenness, supra; Nye v. Daniels, 75 Vt. 81, 53 A. 150. We have not considered whether the earlier holdings respecting the right of an assignee to sue in his own name are affected by the Practice Act. (G. L. 1800) which has...