Durkee v. Stringham

By the Court,

Cole, J.

Although a considerable time has elapsed since this cause was argued, and even since the decision of the court was announced, reversing the decree of the circuit court, yet, hitherto, no opinion has been prepared and *120filed, which would inform counsel, and the parties interested, of the views we entertain of the case. And it is no more than justice to the members of the court to say, that this delay is not attributable to a want of attention to the case, or to a failure to bestow upon it much more than the usual degree of time and labor, devoted to the examination and consideration of causes which come before this court. In consequence of the various proceedings had in the cause, it has become much complicated, the record is voluminous, the questions involved are numerous, and some of them difficult and obscure.

In the first instance, we were all clearly of the opinion that the decree of the circuit court was erroneous in some important particulars; but we were unwilling to send the case back to the circuit, without settling, if possible, all the questions raised in the discussion, and definitely and fully adjudicating all the rights involved in this protracted litigation. With this view, it was expected that each member of the court would prepare an opinion. This was desirable, and undoubtedly would have been more satisfactory. Recent events have, however, rendered this impossible; it is, therefore, thought best that I should, as briefly as possible, announce the conclusions at which we all arrived in our examination of the cause. Nothing like an extended discussion of any one point will be attempted, and some questions raised and discussed at length by counsel, will be no further noticed than that their substantial dispositions will follow from the determination of other questions in the cause. It is hoped that enough will be said to inform others of our views upon the merits of the case.

The first point that naturally presents itself, is one of practice. Some of the appellees, or Taylor, at least, as well as the appellant, Joseph Stringham, were dissatisfied with the decree of the circuit court, but neglected to take their appeal —supposing the appeal which was taken brought up the *121cause for a rehearing in this court, and necessarily opened the whole case for our consideration. But it is.contended by the counsel for the appellant, that this is a mistake; and that even if we should be of the opinion that the decree was not as favorable to Taylor as it should have been, still that we cannot modify or amend it to his advantage, he not having appealed. This question has been carefully considered in this case, as well as in the case of Wood et al. vs. Spaulding, unreported, where the same point was made and elaborately discussed by counsel. In this case, the appeal was from the whole decree, while the case of Wood vs. Spaulding, the appeal was only from a part of the decree: and yet, in both cases, we were led to the conclusion that the appeal to this court opened the whole- case, and that it was competent to modify the decree of the court below, and make it more favorable to the appellee, if the whole merits and equity of case required that this should be done. The following are some of the authorities, which, though not precisely in point, still have some bearing upon the question, and were considered in settling this rule of practice: 1 Tomlyns Law Diet., “Appeal;” 1 Spencer’s Eq. Jurs., 393, chap. 10; 2 Daniel Ch. Pract., 1222; 3 id., 1602, 1628 to 1632 ; Hill vs. Chapman, 1 Sumners Vesey, 405, Note A.; Consequa vs. Fanning, 3 John, C. R., 587; Glover vs. Hodges, 1 Saxton, N. J. 113; R. S., chap. 84, s. 112. More time might be spent in the examination of this question of practice, were it not that, since the adoption of the code, it has no practical importance whatever, and therefore it will be dismissed without further remark. Being of the opinion that it is competent for the court, in reversing the decree for error, as respects Taylor, to further direct that the circuit court proceed and render one more favorable to his rights than the one appealed from, if the equities of the case shall require, we advance to the consideration of other questions in the cause.

*122And as a preliminary matter it becomes necessary and proper to glance at some of the features of the articles of association set out in the record, and ascertain, if we can, what power and rights the stockholders of the company, as between themselves, had over their shares of the company property. It appears from the articles of association that Harvey Durkee, Albert G. Ellis, Henry T. Stringham and some others, associated themselves together in February, 1837, and formed what was called in the written articles of association, the Neshoto Lumbering Company. The declared object of the company was, to raise moneys to be employed for the benefit of the members of the association, in the purchase and sale of lands situated on the borders and in the vicinity of Twin Rivers, in Wisconsin, to build mills, and machinery for sawing, grinding, and other purposes, on that river, and to lay out a town on the land of the company, and to make such improvements upon the land as might be deemed beneficial for the company. The capital stock, consisting, as it appears, almost exclusively of real estate, was divided into five hundred shares, for which the ordinary certificates were issued, declaring that the holder was proprietor of shares in the capital stock and beneficial interests of the company, and had paid the sum of dollars on each share, and that the same was subject to all the provisions, covenants and charges contained in the articles of association. These certificates of stock were made transferable by assignment, and it was provided in the articles of the association that the capital of the company, notwithstanding the conversion of any part of it into land, should be deemed and treated as personal property. The title of the real estate and of the personal property was vested in a trustee, in trust for the use of the company, who was the authorized agent to sell, bargain and convey the personal property, to lease the lands, make conveyances, and in his name *123to take all conveyances, as trustee for the company. It appears that Albert G. Ellis was the first trustee, and was an original stockholder to the amount of one hundred and fifty shares. He resigned in July, 1837, and Henry T. Stringham became trustee, to whom three undivided fourths of the land mentioned in the articles of association were at that time conveyed by the former trustee, Ellis, and wife, to hold the same in trust for the company. It also appears that Henry T. Stringham became the owner of three hundred and eighty-seven shares — that is, of all, except sixty shares owned by Harvey Durkee, and fifty-three owned by Ramsey Crooks, the assignee of James D. Doty, an original subscriber to the stock The appellee, Taylor, claims to own forty-three of the Crooks shares, having obtained the certificates, by purchase and transfer, from Wesley Truesdail, who, as cashier of the Bank of St. Clair, had also obtained them from Crooks. This joint stock company, which was not incorporated, as respects its liabilities, to third persons, would be generally governed by the rules and principles of common commercial partnerships. It is not very important, and yet it is well to remark, that it had some features peculiar and not found in commercial partnerships. No time was fixed for the continuation of the company, and a shareholder might sell and transfer his certificates and release himself from all liabilities of the association (at least as among the stockholders), and the transferee would become a member of the association, and entitled to the same rights and privileges as an original subscriber.

In these articles of association there is an evident purpose and design to give the real estate of the company, as far as possible, the quality of personal property, and as between the stockholders, perhaps, no objection could exist to such a stipulation. The trustee, who was required to be the owner of stock, to the extent, at least, of one share, took the title of *124the property, real and personal, in trust, for the use of the company. The whole capital stock was divided into five hundred shares, and might be represented by as many certificates. Each certificate represented an equitable title, or interest, in the property of the association. It is obvious that a stockholder, who might own one hundred shares, would, as between him and the other stockholders, be equitably entitled to a one-fifth part of the property. If he should become the owner of four hundred shares, he would then become entitled to four-fifths of the property, and so on in a like proportion. And if the trustee should become the owner of four hundred shares, he would likewise become entitled to four-fifths of the property. Now by every principle of law it would seem that these certificates of stock, which, for convenience, were made transferable, by assignment, representing a proportionable interest in the property of the company, an interest which a court of equity would protect, and could be sold, pledged, or mortgaged by the owner, like any other kind or species of property. The mortgagee of such certificates would likewise have such an equitable lien, or interest, in the company property, as a court would recognize and protect This proposition, to our minds is too plain for argument, and we would not have supposed that a doubt could be entertained upon the point, had not the circuit court held otherwise, as we understand their decision.

It now becomes necessary to refer to some farther facts in. the case:

It appears that on the 17th of January, 1840, Henry T. Stringham executed to his brother, Joseph Stringham, the appellant, a deed, absolute, on its face, by which he conveyed to him an undivided three-fourths of all the lands which he held in trust for the company. This deed was placed upon record the same month it was executed. It does not appear what number of shares Henry T. Stringham owned at the *125time he executed this conveyance. On the 12th of March, following, Henry T. Stringham further executed to Wesley Truesdail, the cashier of the Bank of St. Clair, a mortgage upon all the lands which he held in trust, for five thousand dollars, as a security for the payment of his indebtedness to the bank. Subsequently it appears Truesdail learned of the existence of the deed, which had been previously given to Joseph, and early in 1843 came to an understanding or agreement with Henry T. Stringham, that Joseph should convey the lands to Truesdail, who was to hold them as security for Henry’s indebtedness to the bank. Joseph was therefore applied to for a conveyance, but declined giving one, for the reason that he had just filed his petition for a discharge in bankruptcy, and had included these lands among his assets, instead of a conveyance from Joseph, it was arranged between the parties that the lands should be sold by Joseph’s assignee in bankruptcy, and bid in by Truesdail, and a conveyance made direct to Truesdail by the assignee, which was accordingly done, in May, 1843. And at this time Henry T. Stringham delivered to Truesdail all the title deeds and all the stock certificates which he then held, and Truesdail went into possession of the property.

A question has been made as to the nature or kind of interest, which was conveyed to Truesdail. by the assignee’s deed, and an observation might as well be made here upon that subject, as elsewhere. The assignee’s deed purports to convey, and undoubtedly did convey, to Truesdail, “all the right, title and interest whereof the said Joseph Stringham was seized on the 10th day of February, 1843,” that is, all the title and interest which was vested in Joseph Stringham, at the time he made application for his discharge in bankruptcy It will be borne in mind that the deed from Henry T. String-ham, to Joseph, dated January 17, 1840, was absolute upon its face, and purported to convey three undivided fourths of *126all the lands which he held as trustee of the company. Still, it is now insisted that the deed was really and truly given to secure the payment of five or seven hundred dollars, which Henry T. owed Joseph Stringham ; and that the latters interest in the company’s property, or in the lands thus conveyed, was that of a mortgagee’s to the amount of his debt against Henry, and that nothing more than this interest was conveyed by the assignee to Truesdail. We are disposed to adopt this view of this transaction; but still, it is to be observed, that in addition to this deed from the assignee, and the mortgage which Henry T. had previously given Truesdail for five thousand dollars, he turned over to Truesdail also all his certificates of stock, and title papers, to secure the amount which he then owed and might become liable for, to the Bank of St. Clair. So at this point of time it seems to us indisputable that Henry T. Stringham had assigned and conveyed to Truesdail his entire equitable estate and interest in the property of the association, and had nothing further to convey to any one except an equity of redemption. For, as we have already remarked, we know of no principle of law which inhibited him from mortgaging this interest, whatever it was, in the same manner that he could any other description of property. The rights of creditors are placed out of the account — they do not intervene here. This is an inquiry as to what it was competent for Henry T. Stringham to do with whatever interest he had in the property of the association. Could he not sell it ? Could he not mortgage it ? Most assuredly he could. What is the consequence ? That nothing remained in Henry T. Stringham after thus mortgaging his entire interest in this property but an equity of redemption. And according to our understanding of the case, this equity of redemption Henry T. Stringham and wife conveyed in 1844 to Joseph String-ham by the deed which they then made and executed. We find then that Truesdail, as the agent of the Bank of St. Clair, *127or to come one step further down in the case, that the appellee, Taylor, the assignee of the Bank, holds the entire interest of Henry T. Stringham in and to the lands, and the property of the Neshoto Lumbering Company, subject to an equity of redemption outstanding in Joseph Stringham, upon being paid the amount due on the mortgage which had been assigned him. It appears to us that this is the precise, true, relation of the parties to each other and to this property. We leave out of view, for the time being, the forty-three shares which Taylor claims to own absolutely and which will be referred to hereafter. At what time the company was dissolved becomes quite immaterial to this discussion. When its debts are paid the company’s property can be distributed to those justly entitled to it. Joseph Stringham is entitled to take Henry T. Stringham’s interest upon paying the liens upon it. What the mortgage debt is will next be considered.

The testimony in the case shows that on the 19th day of May, 1845, Truesdail, on behalf of the bank of St. Clair, executed under his hand and seal, a declaration in writing, to the effect, among other things, that he held the Neshoto lands in trust, to secure the indebtedness of Henry T. Stringham to the Bank, and covenanting that if Joseph Stringham should well and truly pay him, or the assignees of the Bank the amount of such indebtedness, in the notes and liabilities of the Bank, or in cash, on or before the 1st day of January, 1846, that then he would convey to said Joseph Stringham all the title and interest which he held in such lands, &c. At the same time Henry T. Stringham signed a statement, on the same paper, in which he acknowledged that the amount due the bank, from him, was twelve thousand five hundred and eighty-two dollars and thirty-seven cents, for which sum he gave his promissory note payable on or before the first day of January, 1846, in the notes and liabilities of the bank. Although this declaration of trust or defeasance, and the set*128tlement then made with the bank, accrued after Henry T. had conveyed his equity of redemption in the Neshoto lands to his brother Joseph, yet the evidence satisfactorily shows that Joseph knew all about the transaction, was fully apprised of the amount which Henry acknowledged he then owed the bank; that he caused this declaration of Truesdail’s to be put upon record in Manitowoc county, and consequently we think he should be held as much bound by these solemn acts and admissions of the parties as Henry himself The precise amount of Henry’s indebtedness to the Bank of St. Clair, at any particular period anterior to this settlement, and for the payment of which the bank have a lien upon this Neshoto Company property, cannot be accurately determined from the evidence in the case. The testimony goes to show that Henry, for some years, had considerable business with the bank — had become indebted to it for money advanced on his private account, and had also become liable to the bank upon other matters. But we think this settlement, the acknowledgement of Henry of the amount due the bank, the giving of his promissory note for this amount, affords the clearest, most satisfactory and conclusive evidence of the extent of his indebtedness, and the amount which in equity and good conscience he ought to pay to redeem his property. The appellant in his cross bill insists that Henry’s indebtedness to the bank has been fully discharged, and an effort has been made to weaken or destroy the force of this evidence of the indebtedness of Henry T. Stringham to the bank, by proving admissions and statements of Truesdail, to third parties, before the settlement, in which, it is alleged, he represented that the five thousand dollar mortgage had been discharged, or that the bank had means in its possession, belonging to Henry, sufficient to meet it. But the testimony offered upon this point, consisting as it does of verbal admissions made by Truesdail, a kind of evidence which it is said by high authority, should *129ever be received with caution, (1 Green Ev. Sect. 200) liable as it is to have been misunderstood at the time by the witness, or some material portions of which may have been forgotten, in our judgment cannot, and ought not, to overcome and destroy the force of a settlement deliberately made by the parties in interest, and who must have known the true state of the accounts they were adjusting. We do not therefore feel authorized to assume, from the evidence in this case, that the settlement between Henry T. Stringham and the Bank of St. Clair, made on the. 19th day of May, 1845, was not fair and just, and worthy of credit, and that it does not show the true balance due from Henry T. Stringham to the bank. It should be held conclusive and binding between the parties until impeached by testimony stronger than anything we find in this case.

It appears that in November, 1847, all the right title and interest of the Bank of St. Clair in the Neshoto property and in and to the mortgages and claims against Henry T. String-ham, and in the certificates of stock, &c., were sold, transferred and assigned to the appellee, Isaac Taylor, who paid an adequate and valuable consideration therefor, and who soon after went into possession of the property, and for anything that appears in the case, is in possession of it to-day. He stands in precisely the same relation to the property that the bank did, clothed with the same equities, no more, no less.

It was suggested by his counsel, on the argument, that he now held all the interest which Henry T. Stringham ever had or was entitled to in the property, free from any equity of redemption in Henry, or his grantee, Joseph. But we really perceive nothing in the case which would change the original relations of the parties to each other, or the property, or which ought to bar the right of redemption. As to the forty-three shares, derivable from Doty and Crooks, we suppose Taylor holds those shares, and the interest they represent in the *130property, disencumbered from any equity of redemption outstanding in the Stringhams. It was contended that, by the instrument or defeasance of May 19th, 1845, Truesdail covenanted and agreed to convey to Joseph Stringham, his heirs, &c., all the interest and title of the Bank of St. Clair in the Neshoto property, upon Henry’s indebtedness to the bank being discharged, and that this agreement included the forty-three shares purchased by Truesdail from Crooks, September 27th, 1844. We do not think this is a fair construction of that instrument. We suppose by this instrument, Truesdail, on behalf of the Bank of St. Clair, agreed to convey, on the payment of the note which Henry had given to the Bank, the precise interest which the Bank held to secure such payment. Henry T. Stringham never owned these forty-three shares, and of course could never have mortgaged them to the bank, or anybody else.

Still further it was contended that these forty-three shares had become forfeited in consequence of the non-payment of certain assessments made upon the stock. It is a sufficient answer to this to say that the articles of association contain no power to forfeit stock. It was provided that if the association should not have funds sufficient to meet the expected liabilities of the company, the trustee had power, after the requisite notice, to require the stockholder's to pay in on each share an instalment, not exceeding two dollars on a share; but he has no authority given him to forfeit stock in ease of non-payment of calls. It does not appear that the trustee attempted to exercise this power of forfeiting stock, but if he had he evidently could not act beyond the scope of the authority given him in the articles of association. Henry T. Stringham, in his answer to the original bill, filed by Harvey Durkee in 1843, sets forth his account as trustee, and shows a large balance in his favor from the company. It has been insisted that this claim against the company Henry had transferred *131to the appellant. We see no evidence of this, and we fully concur in the decision of the circuit court upon this point, that the balance of this account, whatever it may be, belongs still to Henry.

The contest in this cáse has been upon the issues made by the cross bill, and in that light we have examined the cause. We think the case ought not to go out of court upon any technical objection, or nice point of practice. The court has all the parties in interest before it, and can do complete justice between them. That this is a consumation devoutly to be wished,” cannot be denied, after more than fifteen years of litigation.

The circuit court held that the deeds and mortgages executed by Henry T. Stringham to Joseph Stringham and Wesley Truesdail, oí the company property, are fraudulent and void as to the other stockholders. It follows from the views we have expressed, that this is erroneous, and that it was competent for Henry T. Stringham to give good and valid mortgages upon his own interest in this property, subject to the just debts of the company, and to any equities existing in favor of other stockholders. This we have seen he has done, and that the mortgage relation now .actually exists between the appellant, the grantee of an equity of redemption, and the appellee, Taylor, the assignee of a valid subsisting mortgage.

The decree of the circuit court must be reversed, and the cause remanded for further proceedings according to law.