Newtown Sav. Bank v. Lawrence

Citation41 A. 1054,71 Conn. 358
CourtSupreme Court of Connecticut
Decision Date04 January 1899
PartiesNEWTOWN SAV. BANK v. LAWRENCE et al.

Appeal from superior court, New Haven county; George W. Wheeler, Judge.

Suit by the Newtown Savings Bank against Gordon B. Lawrence and others to foreclose a lost and unrecorded mortgage. There was a decree for plaintiff, and defendants appeal. Reversed.

The court found the following facts: "(1) On April 14, 1892, the plaintiff loaned to the defendant Lawrence $3,000 upon his demand note, secured by a mortgage duly executed upon the property described in plaintiff's Exhibit A, without having had either search of the title made or an appraisal. (2) On said day the title to said property stood in the name of said Lawrence, subject to a mortgage to the plaintiff of $7,000. (3) Mr. Lawrence had acted as the agent of the plaintiff on a number of occasions in negotiating for it loans In Waterbury, and the plaintiff had confidence in him. (4) The plaintiff caused said mortgage and note to be drawn and sent to the said Lawrence, to be executed and returned to it. This was done, and because of its confidence in him, the plaintiff sent to him by mail, after said mortgage had been duly executed and delivered to it, the mortgage, to have the same duly recorded, together with a draft for the face of the loan, and retained the note. (5) Lawrence neglected to have the same recorded, and it became lost. (6) On about March 10, 1894, said Lawrence was adjudged an insolvent in the probate court for the district of Waterbury, and the defendant Hart was duly appointed trustee of the said insolvent estate, and qualified, and has since been acting as such trustee. (7) It did not appear in evidence whether Lawrence was adjudged an insolvent upon a voluntary or involuntary assignment The court understood the assignment was a voluntary one, and so treated it. (8) Said Lawrence gave to Hart, shortly after his appointment as trustee, a list of his property, and stated to him that the said property was subject to two mortgages, one for $7,500, on property at corner of Bank and James streets, and one for $2,500, on Bank street lot. (9) Said property, subject to said $3,000 mortgage, was included in the appraisal of said insolvent estate, and on May 10, 1894, the said trustee received an order from the said court of probate to sell said property either at public auction or private sale. (10) The trustee paid the interest on such loan up to May 1, 1895, in three different payments, under the belief that the plaintiff held mortgages upon said property aggregating $10,000. (11) On March 15, 1895, the trustee procured a title search of said property, and ascertained that the mortgage in question did not appear of record, and thereafter saw the plaintiff, and learned from it that it did not have in its possession such mortgage, and it has in fact never been found. Until so informed by the trustee, the plaintiff believed it had said mortgage, duly executed and recorded, in its possession. (12) Under said order, the trustee contracted to sell said premises to the defendant Kelly, on March 27, 1895, and thereafter, and before said sale was consummated, fully Informed Mr. Kelly of the claim of the plaintiff that said premises were held by it as security for said $3,000 loan; the said note being at that time in the possession of the plaintiff, and known to be so by the trust tee. (13) Thereupon Mr. Kelly declined to perfect such contract unless he were guarantied from loss in the manner described in Exhibit 2, and the deed (Exhibit 2) was duly executed and delivered to Kelly, and he paid the consideration named therein, which was somewhat more than its actual value, and purchased by Kelly because he owned other property in the locality."

Paragraph 4 of the complaint was as follows: "(4) Since the execution and delivery of said deed, and since the plaintiff so sent the same to Waterbury for record, and before the plaintiff had discovered that said deed had been lost and had not been recorded, as alleged in paragraph 3, to wit, on the —— day of ——, 18—, the said Gordon B. Lawrence made an assignment of all his property, including said real estate so mortgaged to the plaintiff, to the defendant C. H. Hart, as trustee in insolvency under the statute of the state of Connecticut in such case made and provided, and said Hart has qualified and is now acting as such trustee." The defendant Kelly in his answer admitted that the defendant Hart was duly appointed trustee of the estate of Lawrence, and was duly qualified as such trustee, and alleged that he had no knowledge or Information sufficient to form a belief as to the other matters aleged in paragraph 4. The defendant Hart, in answer to paragraph 4 of the complaint, admitted that Lawrence was adjudged to be an insolvent debtor upon the petition of a creditor of said Lawrence, and that he (Hart) was appointed trustee of his estate. The plaintiff replied to that part of Hart's answer that, except as admitted in the complaint, it had no information sufficient to form a belief.

Edward P. Cole, for appellants.

Robert E. De Forest, for appellee.

HALL, J. (after stating the facts). Neither of the defendants admitted the allegation of the complaint that Hart was appointed trustee under a voluntary assignment of Lawrence. Both defendants admitted that he was duly appointed trustee. Further, as to his appointment, the defendant Kelly alleged that he had no information sufficient to form a belief; while the defendant Hart, himself the trustee, alleged that he was so appointed upon the petition of a creditor of Lawrence. Under these pleadings, the burden was upon the plaintiff to prove that the proceedings in insolvency were voluntary, had that alleged fact been a material one. Practice Book, p. 16, rule 4, § 4. In the absence of any evidence upon that point, it could not properly be assumed that the assignment was voluntary. From the fact that no proof was offered, it would rather appear that the plaintiff was satisfied to accept the statement in the trustee's answer that his appointment was under compulsory proceedings in insolvency.

But we do not regard it as material to the rights of the parties in this case whether the proceedings in insolvency were voluntary or compulsory. The alleged voluntary assignment of Lawrence was "of all his property, including the real estate so mortgaged to the plaintiff." A voluntary assignment in insolvency must, under the statute, embrace all the property of the assignor, with certain exceptions not material to this case. Gen. St. § 501. By section 507 of the General Statutes, the trustee is appointed "to take possession of, manage, and dispose of" all the debtor's property, with certain exceptions, and all the property owned by the debtor "at the time of filing such petition," with said exceptions, vests in such trustee. If under a voluntary assignment the title of the trustee is by force of the common law, and in involuntary insolvency by force of the statute, he takes in either ease the same title to the same estate. In neither case is the power of the trustee to take or recover, as a part of the insolvent's estate, personal or real property held or claimed by others, limited by the power of the debtor over such property. Preferences, sales, and conveyances actually or constructively fraudulent, and which could not be avoided by the insolvent, may be set aside by the trustee appointed under voluntary or Involuntary proceedings. Shipman v. Insurance Co., 29 Conn. 245; Gaylor v. Harding, 37 Conn. 508. In case of a voluntary assignment in insolvency, the right to reclaim property fraudulently sold is conveyed to the trustee by an assignment to him of all the debtor's property. Filley v. King, 49 Conn. 211. There seems to be no difference in principle between the power of the trustee in such a case and that of a trustee under a general assignment in insolvency who is seeking to hold land claimed by the debtor's grantee under an unrecorded deed, provided such deed is invalid as against such trustee. Whether we regard him as an agent of the debtor, of the creditors, or of the law, we think the trustee in this case is clothed with the same power, and charged with the same duty, by our insolvent law, to take and dispose of the land in...

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