Westminster National Bank v. Ida S. Graustein

• Decision Date: 13 March 1930
• Citation: Westminster National Bank v. Ida S. Graustein, 270 Mass. 565 (Mass. 1930)
• Court: Supreme Judicial Court of Massachusetts
• Parties: WESTMINSTER NATIONAL BANK & another v. IDA S. GRAUSTEIN & others.

270 Mass. 565

WESTMINSTER NATIONAL BANK & another v. IDA S. GRAUSTEIN & others.

Supreme Judicial Court of Massachusetts, Worcester.

March 13, 1930

September 23, 1929.

Present: CROSBYPIERCE, SANDERSON, & FIELD, JJ.

Equity Jurisdiction, To reach and apply equitable assets, Laches.Bills and Notes, Assignment, Consideration, Validity Payment.Assignment.Fraud.Res Judicata.National Bank.Corporation, Ultra vires.Evidence, Competency, Relevancy and materiality, Presumptions and burden of proof.Payment.Equity Pleading and Practice, Master: findings, report Commencement of suit; Decree; Election; Parties; Bill.Limitations, Statute of.Agency, Existence of relation, Scope of authority.Bankruptcy.Negligence, Of assignee of chose in action.Contract, What constitutes, Consideration, Validity.Frauds, Statute of.Interest.A woman, after making application to a national bank for a loan of $10,000, in November, 1914, executed a negotiable promissory note for that sum secured by a mortgage and payable to a man in monthly instalments of $500.On the same day the man executed a note to the bank for the same sum and assigned the mortgage and mortgage note to

it.He did not indorse the mortgage note.

About two weeks later the bank credited the woman's account with $10,000.As a matter of record, the bank thereafter treated the man's note as the primary obligation and the mortgage note as security.It subsequently charged several monthly instalments to the woman's account with it and credited them on the man's note.In certain months it did not do so, although there was money in the woman's account available for that purpose.The woman knew that the bank was the real party in interest in making the loan, although she believed that the note had been indorsed to it.There was no fraud practiced upon the woman by the bank with regard to the identity of the parties to the transaction, the assignment of the note and mortgage, the bank's bookkeeping methods or the deduction and application of payments.In September 1915, when the woman had paid $5,000 upon the loan, she desired to borrow $3,000 of the amount paid; and made an agreement in writing with the bank that such $3,000 might be "applied to other purposes" and not indorsed upon "the notes secured by said mortgage."She thereupon returned to the bank six of the debit slips showing six monthly payments of $500 each deducted from her account, and delivered to it a note of $3,000, whereupon the bank placed $3,000 to her credit.Thereafter one monthly payment was deducted from her account and credited to the man's note.In 1916she stated that $7,500 remained unpaid on the mortgage note.In December, 1915, she gave a sum of money in excess of $7,500 to a man, who had no general authority to act for the bank and no authority to collect money for it from her.

None of this money was received by the bank.In a suit in equity by the bank against the woman to recover the balance of $7,500 upon the mortgage note, it was found and ruled that there was consideration for that note; that the transaction relating to the $3,000 was not a new loan but a reborrowing to that extent of the instalments paid; that the defendant had waived her right to have that sum applied to the mortgage note; and that a balance of $7,500 was due the plaintiff.The plaintiff offered the $3,000 note in evidence, but stated that it was not presented for the purpose of recovery.Held, that

(1) Under G.L.c. 231, Section 5;c. 107, Section 72, the plaintiff had sufficient title to the mortgage note to maintain the suit in its own name;

(2) The man, the payee of the mortgage note, was not a necessary party to the suit, his assignment having been unconditional and he having no further rights which could be affected;

(3) Since the defendant executed her obligation in the form of a negotiable instrument, she could not object to the plaintiff's enforcing it, there having been no fraud practised upon her in this connection;

(4) The finding, that there was consideration for the mortgage note, was warranted: the circumstances leading up to the lending of the money by the plaintiff appeared to be all part of one transaction and the loan to be the result of the execution of the note;

(5) U.S. Rev. Sts. Sections 5136,5137, prohibiting national banks from taking a mortgage of real estate to secure a new loan, did not render the note wholly void, but merely voidable in proceedings instituted by the United States: those sections did not afford the defendant a defence to the note;

(6) In the circumstances, there appeared to be nothing in the plaintiff's method of making the loan or in its bookkeeping methods relating thereto which would bar its right to recover; and there was no merit in a contention by the defendant that funds in her account with the plaintiff had been misappropriated by it;

(7) The transaction in connection with the reborrowing of $3,000 in September, 1915, revived to that extent the defendant's indebtedness which had been discharged by her payments against the mortgage note: the parties legally could vary the application of her payments by mutual agreement;

(8) There was no error in the findings and rulings as to such reborrowing;

(9)The parties' agreement with regard thereto and the note for $3,000 were competent in evidence;

(10) The finding as to the amount due on the note in suit was warranted;

(11) In the circumstances, the payment in December, 1915, was not a payment thereof to the plaintiff and was not a defence to the suit;

(12) The failure by the plaintiff in certain months to deduct the monthly payments due on the mortgage note from the defendant's account was not prejudicial to the defendant.

It appeared in the suit in equity above described that the defendant had a claim against a certain railroad corporation which she had assigned to the plaintiff as security for her note; and that the railroad corporation had deposited with a trust company a special fund under an agreement with her and the trust company reciting that the adjustment of her claim against it was subject to the assignment, that the deposit was made to protect it from liability to the plaintiff on account of the assignment, that, upon payment to the plaintiff of the indebtedness secured by such assignment and the delivery to the trust company of releases by the plaintiff discharging the railroad corporation of liability to the plaintiff, the trust company would pay the deposit to the defendant, and that the defendant should pay all the charges, compensation and expenses of that company.The plaintiff sought to reach and apply the deposit under G.L.c. 214, Section 3 (7), in satisfaction of the defendant's obligation to it.The trust company still had the deposit at the commencement of the suit.The railroad corporation and the trust company were joined as parties.Held, that

(1) The deposit could not be attached in an action at law; (2)The defendant had an interest in the deposit;

(3) All the parties being before the court, the plaintiff was entitled to reach and apply the deposit to satisfy the defendant's indebtedness to it;

(4) In the final disposition of the suit, the trust company was entitled to receive its charges, compensation and expenses.It appeared in the suit in equity above described that the defendant had commenced and tried a suit in equity in another county against the plaintiff and the railroad corporation to set aside the assignment to the plaintiff of her claim against the railroad corporation.Held, that

(1) The issues determined in the previous suit were conclusive in the present suit so far as they were material;

(2) The extended record in the previous suit properly was admitted in evidence in the present suit.The last payment was due on the mortgage note above described on July 3,

1916.The last payment of principal thereon was credited to the defendant on October 4, 1916.The note was not an attested instrument within the provisions of G.L.c. 260, Section 1, Third.On December 21,

1916, the defendant, desiring to borrow a certain further sum from the plaintiff, executed an agreement reciting that the plaintiff was the holder of a mortgage dated in November, 1914, originally for $10,000, upon which $7,500 "remains unpaid," and providing that the mortgage should cover the new loan.The suit was commenced by a common law writ dated October 19, 1922, service of which was made upon the trust company on October 21, 1922, upon the railroad corporation on December

18, 1922, and upon the defendant on January 27, 1923, by supplemental process for which application was made on January 9, 1923.It was found that service could have been made upon the defendant between the date of the writ and the return day; that the desire of the plaintiff to have service made on the trust company and the railroad corporation previous to service on the defendant was proper; and that the delay in serving upon the defendant was not such as to indicate an intention to postpone the commencement of the suit.The trial judge ruled that the agreement of December 21, 1916, was a sufficient acknowledgment in writing by the defendant to satisfy the statute of limitations, G.L.c.

260, Section 13; and that the suit was commenced on October 21, 1922.Held, that

(1) The agreement of December 21, 1916, was an acknowledgment by the defendant to the plaintiff as her creditor within the provisions of said Section 13;

(2) The recital as to the mortgage sufficiently identified the mortgage note, and the acknowledgment of the amount due on the mortgage necessarily referred to the amount due on the mortgage note;

(3) There was no merit in a contention by the defendant that the suit was not commenced until process...