784
FEDERAL REPORTER,
sought to lJe paid.! Moreover, the tender must at all times be kept good; that is, the deUtor must constantly keep on hand the money tendered, separate from his other money, ready to pay over to the creditor whenever he might be ready to take it, aud III ust lJring the money into court. 2 A tender need not include interest upon the debt if none was contracted for, and none has accrued lJy way of damages after a demand. Thus, upon a pledge of a watch by way of a sale of it for $tl2, with an agreement the seller should have it again in 30 days, upon the payment of $87. a tender of the latter sum was hell! sutlicient, the five dollars bonus being reganled as in lieu of interest. 3 Upon the tender of the amount of a delJt for which an accommodation note is held as security, the maker of such note, being in effect a surety, is discharged. The creditor. by a tender from the prineip:ll delJtor, has in his hands the mcans of payment, and by his refusal to accept it discharges the snrety; and in an action by the creditor upon the collateral note, the maker of that need not plead the tenl!er, or bring the amount into court. 4 LEONAIW
A.
JONES.
Irass v. H'genholam. 27 Hun, (N. Y.) 4(1(;; Brookl n I aLlk v. De Grauw, 23 Welld. (N. Y.) 342. 2L-us:) v. Hie,ellbmam, supra.
SHines v. Strong, 46 How. N. Y, Pro 97; af. firmed. ·6 N. Y. 670. <Appletvll v. Dvnaldson, 3 Pa, St. 381.
STAFFORD NAT. BANK V. SPRAGUE
and others.
(Circui' Court, D. Connecticut. 1. 2.
Septcmber 15, 1883.
UNRECORDED DEED-ATTACIUNG CREDITOR-CONNECTICUT STATUTE.
By the law of Connecticut an unrecorded deell is inctIectual, as against attaching creditors of the grantor, unless they had notice of such conveyance. S.um-PoSSESSIQN OF GRANTEE-NOTICE.
As a general rule, open, notorious, and exclusive possessio'1 by the grantee, u:1der an unrecordcd deed, is suffiCient to a legal presurllption of notice, to an attaching creditor of the grantor, of the existence of such conveyance; but the testimony in regard to the notorious posscssion must be clear and certain, and such as to make thc inference of notice to the creditor beyond serious que,stiou. OF TEXAXCY.
3. 4.
In such a cas" notice of a tcnancy will not, it scems, amount to constructive notice of thc les-or's tItle. DEED FOil BEXEFIT OF CBEDITOB-DESCnIPTIOX OF PROPERTY,
By the of Connecticnt, where the unly des:'l'iption of propcrty conveyed by a deed of is all the property of the grantors, real and personal, in eerta:n town- in that sta' e, named in such conveyance, the description is insujjc'ent, and the deed conveys no title to the Connecticut lands, TO CARRY ox Br:SIXESS-);ox-AsSEXTIXG CnEDIToRs-FnAuD.
5,
By tile law of Connecticut, wllere assignments, intended for the benefit of all the creditors. place the entire estate of the dchtor beyond thc reaeh of nonassenting creditors, in the hanlls of a trustee, who is empowered and d.reeted to carn' on an pxtensh'e a'ld hazardous m:lnufacturini:!: husi.ess for an indefinite pel'iZld, and thus sul,ject the property of the non-:lss'enting creditors to the hazards and uncertainties of sueh husines s . the CO" \'el'ances will he held fraudulent in law, so f:lr as they attempt to convey lands in Cunnecticut as against Ilonassenting creditors.
In Equity.
STAFFORD NAT. BANK V. SPRAGUE.
785
RatclijJe Hieks and .J. Halsey, for plaintiff. Charles E. Perkins, for defendants. SHIP::IfAN, J. In the year 1880 the plaintiff recovered judgment for $6,479.50 in this court in an action at law against Amasa Sprague and William Sprague, having attached as the property of said defendants, at the commencement of the suit on October 1, 1878, the real estate which is the subject of this bill in equity. On June 10, 1880, the plaintiff, to secure this unpaid judgment, filed its cel·tificate of lien upon the attached real estate, in accordance with the statute of Connecticut, whereby a statutory judgment lien was placed upon the land described in the certificate, which lien can be foreclosed or redeemed in the same manner as mortgages upon the same estate. Fifteen pieces of land were described in the certificate. The first seven pieces and the fifteenth piece are in the town of Sterling. For sufficient reasons the plaintiff has abandoned its claim to the seventh piece, and also to the eighth piece, which is in the town of Canterbury, and the facts hereinafter stated in regard to the attached lands will have no reference to those two pieces. The ninth piece is in Scotland, the tenth, eleventh, twelfth, and thirteenth pieces are in Windham, and the fourteenth piece is in Frank. lin. All the lands now claimed by the plaintiff, except the tenth and thirteenth pieces, were originally conveyed to the defendant Amasa Sprague. Said two pieces were originally conveyed to the defendant William Sprague. All the lands except the thirteenth piece were conveyed to said grantees prior to August 9, 1865. The thirteenth piece was conveyed to William Sprague on September 28, 1866. On or about August 9, 1865, the A. & W. Sprague ManUfacturing Company was formed, its capital stock consisting in general of the property of the firm of A. & W. Sprague. This firm was originally composed of Amasa Sprague, who was the father of the defendants Amasa and William, and William Sprague, Sr. Each of the original partners had died, leaving a widow and children. The estate vf neither had been settled, the partnership had not been wound up, and its affairs had not been adjusted; but the business had continued under the same name, ,,·ith new partners and the acquisition of new property, until in 1865 the firm consisted of Raid defendants. For the purpose of an ascertainment and adjustment of the rights of all the heirs of the two senior Spragues, and the distribution of the interests of these parties in the common prvperty, the A. & IV. Sprague Company was formed, and stock was distributed to the heirs, or the assignees of the title of the heirs, in proportion to their respective interests. For the purpose of vesting in the corporation the property which ,vas held and managed by A. & W. Sprague, except that known as the Quidnick Company property, the defendants Amflsa and 'Villiam, with the representatives of .\masa, v.17,no.11-50
786
FEDEnAL REPORTEr:.
Sr., and William, Sr., and the guardian of the minor children of the deceaRed daughter of William Sprague, Sr., conveyed all their J'ight and title, whether derived as heirs at law or personal representat.ives of the said Amasa Sprague and William Sprague, both deceased, or however derived, in possession, action. reversion, or remainder, which the grant.ors had in and to the properry, real, aI, and mixed, wh(hesoever situated and in whatooever name any record titles thereof stood, "in the posse&3ion of, and held, managed, and contnlled by, tbe firm of A. & W. Sprague," saving and exceptIng certam specified exceptions, and also excepting the property, rights, credits, and assets at any time heretofore held and managed by the firm of A. & \V. Sprague, which had been charged to the grantors, said Amasa and IV illiam, either jointly or seve.rally, on the nooks of stud property so charged." This deed was not recorded in the land records of either of tile towns in this state where anyattachecl renl estate was situate, and the only deed or conveF"llce by said Amasa or said 'William of any of said claimed and attached lands which was ever lodged for record, or was recorded in tlJe records of any of saili towns, was the trust deed of December 1,1873, to Zecharilth Chafee, which is hereinafter mentioned and which was recorded in the land records of Windham, Sterlillg, and Scotlalld. On or about November 1, 1873, the A. & W. Sprague 1\Ianufacturing Company became deeply insolvent. Its stockholders-Amasa Sprague, William Sprague, 11ary Sprague, widow of William, senior, and Fanny Sprague, widow of Amasa, also severally liable for the debts of the corlJoration. The property of the COl'POration and of the individuals, estimated to be worth some $19,000,000, was widely scattered, and largely s::onsisted in factories. In this state of things, by advice of a committee of their creditors, the A. & W. Sprague Manufacturing Company-\Yilliam Sprague and Amasa Sprague, as individuals and as copartners under the firm of A. & IV. Sprague, Mary Sprague, and Fanny Sprague-mortgaged to ZechChafee all property, real, personal, and mixed, not exempt from attachment by law. which the grantors, or either of them, had in certain specified to\Vns in Rhode Island, (tDe property in Rhode Island IJeing also more particularly described,) flIassachusetts, )1aine, and other named states, and "in the following towns of the state of Connecticut, viz., Sterling, SfH'ague, Scotland, and \Vindham," but excel)ting from the cOlweyance all shares of stank in any corporation belonging to any of the grantors, the same to be transferred to the grantee, u pan his request in writing, by way of pledge to secure the performance of the condition of the deed. This mortgage was to secure the notes of said corporation in sums, but together amonnting to 51+,000,000, payable to the order of A. & W. Spmgue, and by tl'em indorsed, payable three years from January 1, 1874, witb interest from said date at the rate of 7 3·- I) per cent. per annum, payable semi-annually, all which notes Wel placed in the hands
787
of said Chafee, "to be by him used and applied in the paym6nt 01' retiring of such of the present outstanding indebtedness and J;abilities aforesaid as the holders thereof shall, within nine months from the clate of these presents, Lring in and surren\ler and discharge, or aaree to extend the term, and according to the provisions of said as so issued by said trustee, to be countersigned by him." :::'ald property was to be held by said Chafee in trust, but subject to the condition that if the grantors paid the debts which should be brought in under the deed, the expenses of the trust, and the sllid notes that were iSflued by the trustee, then the deed was to be void, and unW default was made in the performance of the conditions, or until sale under the trusts, or unt.il entry by the trustee, the grantors were to retain thepossessioD and use of the granted premises: "ProvicJed, and it shall be lawful for said trustees or trustee for the time being, at any time, or from time to time, before such default or breach, and with or without previous entry, in their or his discretion, to sell at public or private sale any part or parts of said granted estates and property, and to execute and deliver such deed or deeds as may be necessary or proper to vest in the purchaser" a good title: "and provided further, that said trustees or trustee for the time being may at any time, or from time to time, before default or breach, as well as after, enter upon said granted estates and property, or any part or parts thereof, and take and assume the full and absolute possession and control of the same, and in their or his discretion to continue to run and operate, or to close, the mills or print-works of said manufacturing company, or any or either of them, as said trustees or trustee for the time being shall deem for the best interests of the creditors." The trustee was to apply the purchase moneys (1) to the payment of the expenses of the sales and of said trust; and (2) to the payment of all the debts of the grantors which should be brought in under the deed, and of all the notes that should be issued by the trustee under the deed, accounting to the grantors for any surplus that might remain after the full payment of the debts and issued notes. The trustee was not to be answerable for any loss which might happen to the trust estate unless it should occur by his own neglect or default. On April 6, 1874, the A. & ,V. Sprague l'Ianufaeturing Company, A. & W. Sprague, Amasa Sprague,and William Sprague, at the request of a large creditor of said corporation, severally executed grants or assignments in fee-simple to :Mr. Chafee of his or their "right, title, and interest, legal or equitable, in or to all the property of the grantor describEt4i or referred to in the trust deed of mortgage," dated November 1, 1813, "and in or to any and all estate, real, personal, or mixed, of whatever name and nature, wherever situate, not exempt from attachment by law," in trust, to sell the same at public or prIvate sale, and convert the same into money, and the proceeds thereof to apply, first, to the payment of all claims against the grantor provided for in the
783
FEDERAL REPORTER.
mortgage of November 1,1873, which had been, or should within ntne months from said date be, brought in and extended for the time pro vided in said mortgage, with authority to the trustee to make earlier payments than in tJuee years; and, secondly, the residue of the proceeds to apply to the payment of all the creditors of the grantor. 'rhe trustee was authorized to run the mills, or either of them, or to allow the grantor to run the same, if for the best interest of the creditors, the profits to be received by the trustee for the purposes above named, and he was not to be liable personally for the expenses or losses arising from running the mills, but the same were to be charged to the trust fund. Neither of these deeds was recorded in the towns of Sterling, \Vindham, Scotland, or Franklin. The plaintiff did not assent to either of said deeds, whether of mortgage or of assignment, and did not acknowledge in any manner their validity, did not present any claim to the trustee, and has not received any notes, dividend, or payment. The bill prayed, among other things, in addition to a prayer for a foreclosure of the judgment lien, that the trust deed and assignments might be decreed void and of no effect as against the plaintiff, and as against its rights and said judgment lien. The position of the plaintiff is founded upon two statutes of Connecticut, and upon what it alleges to be the established course of the decisions of the snprE\llle court of errors of tlHl state in the construction of those statutes, and in regard to the effect of non-compliance with the recording system of the state on the titles of real estate, and upon the principle that the federal courts are bound to follow the course of decisions of the highest court of the state in the construction of its statutes, if the course has been uniform. TOIcnsend v. Tvdd, 91 U. S. 452; Chicago City v. Robbins, 2 Black, 428; Grafton v. Cummings, 99 U. S. 100. These statutes are as follows: "Xo conveyance shall be effectual to hold !anrls aga.inst any p('l"son hut the grantor anrl his heirs, ulliess recorded on t he records of the town ill which the lands lie." "All frau.iulellt conveyances, suits, jUdgments, executions, or c011tracts, made or contriver! with intent to avoid any dpbt or duty bplonging to olbers, shall, notwithstanding any pretended consitleration therefor, be void as those pprsons only. their heirs, executors, administrators, or aSSigns, to whom such debt or duty belongs,"
The last statute, "in substance, is pursuant to the statute of 13 Eliz. c. 5, and must receive a similar construction." Benton v. Jones, 8 Conn. 185. By the law of Connecticut the unrecorded deed of August 10, 11'65, was ineffectual as against attaching creditors of the grantor unless they had notice of such conveyance. Ca-rter v. Champion, 8 Conn. 548; Whcaton ,. Dyer, 15 Conn. 307; On;is Y. SCIl'ell, 17 Conn. 101; Bush v. Goldcn, 17 Conn, 600; Thc"ll Y. Disbro/c, 39 Conn. 318. The
789
de.endants do not claim that there was actual notice, but insist that the plaintiff had implied notice of the conveyance, and of the title of the Sprague Manufacturing Company, from the fact that it had been in possession from 18!J5 to the date of the trust deed. '1' he question has not arisen before the supreme court of this state, but probably here, as in other states, as a general rule, open, notorious, and exclusive possession by the grantee under an unrecorded deed is sufficient to raise a legal presumption of notice, to an attach. ing creditor of the grantor, of the existence of the conveyance. 1lfe· l1feehan v. Griffing, 3 Pick. 149; Weld v. Madden, 2 Cliff. 584; Pomroy v. Stecens, 11 Mete. 244. The remarks of BUTLER, C. J., in Theall v. Disbrow, supra, apparently recognize the doctrine. But the testimony in regard to the notorious possession of the Sprague Manufacturing Company is meager, whereas it should be clear and certain, and should be such as to make the inference of notice to the creditor without serious question. Pomroy v. Stevens, supra. 1'11'. Guild, the book· keeper or assistant book.keeper of the corporation from November 1, 1867, to October 1, 1873, and since then in the employ of 1\11'. Chafee, in the same capacity, says that the attached lands haye heen entered upon the real estate accounts of the company ever since its organization, and that the expenses and taxes of the lands have been paid by the company and charged as a part of its expenses, and that these lands were treated 1y the company in all respects as were its other lands. 'fhe Sterling town clerk testified that the Sterling land was farming land, and that in 1880 the ,Villiams farm "was occupied by a foreman and g'1l1g of hands, quarrying and farming," and that the lands described in Exhibits !J and 8 were occupied by a tenant. The Scotland land is farming land, and in 18(:)0 "was used for farming purposes." This is the entire testimonyon the subject, and shows that the corporfttion deemed these lands to be its own, and treated them as such, bu t shows nothing of the character of the possession, whether palpable or consistent ,rith the possession of the Spragues, and nothing in regard to the knowledge or notoriety in the respectiYe communities where the land was situate, of the fact that the corporation was in possession, and shows no facts in regard to the acts of ownership by the company from which such knowledge can be inferred. The point to 1e proYed is notice of the unrecorded conveyance to the attaching creditor. Express notice cannot be shown. Notice can be sufficiently inferred by proof of possession of the lund by the grantee, "'hich is YisiLle, and accompanied by such manifest acts of ownC'rsiJip as will naturally be obserred by others, and impart knowledge that the party in possession is the owner. If, after J ':i!J;}, there was no manifest change of posse:3sion, and there were no acts by which the public, or fiO much of tbe public as wafi conyersant witb the lands in question, could infer that the corporation, and not one of the Spragues, was the real owner, then he rule which raises an inference of o,Ynership from apparent possession does not
790
FEDERAL
apply to the case; and from the absence of testimony on this pointan absence which is not due to thoughtless or careless preparaticm-I am led to believe that the apparent ownership was quite consistent with the ownership upon the land records. Some of those Ifluds, perhaps all, were occupied by tenants; but the mere fact that a tenant occ"pied, without knowing to whom he paid rent as his landlord, is not important. "Notice of a tenancy will not, it seems, affect a purcbasar with constructive notice of the lessor's title." Sugdoo., Vendors, 745; Flag.rl v. Manll, 2 Sumn.486. '1'he Conneet.icut decisions are definite that the mortgflge deed to Chafee conveyed to him no title to the Connecticut lands in question. Whether assenting creditors can take advank'tge of this defect of title need not be considered in this case. '1'he only description in the deed of those lands was, all the property of the grantors, real and personal, "in the following towns of the state of Connecticut, viz., Sterling, Sprague, Scotland, and Windham," and it is not denied by the defendants that the deed was, in legal effect, a mortgage. A gf\neral lilw the foregoing is held in Connecticut to be clearly in. sufficient in the case of a mortgage. The decisions are founded upon the necessity of strict adherence to the policy of the legislation of the state in regR.rd to the records of titles of land. In Herman v. Deming, 44 Conn. 124, the court says: "It is a fixed principle of our law that mortgage deeds should give subseQUe,Jlt creditors of the mortgagor definile information as to the <.lebt due to the mortgagee. and as to the particnlar property pledged for its payment. It is only by knowing what the property is that they can learn its value, and it is as important to them to know its value as to know the amount of the debt for which it is mortgaged; and tlley are entitled to the assistanee of the law of registration in obtainin,g this information. To be told that tbe mortgage covers all the real estate which the grantor owns in the town of Hartford is to impose upon them the examination of many thousand pages of records; for it is to be borne in mind that the grantor may have received his tlUes by the same general description, and from many different grantors. The recognition by the courts of such a mortgage as valid would be equi valellt to the abrogation of the reconl;ng system, so far as mortgages are concerhed."
This decision was affirmed in De Wolf v. Spraglle Ma1ll(fg Co. 49 Conn. 283, in regard to the deed which is now under consideration, the court, through Judge HOVEY, saying: .. The deed of the &; ",V. Sprague }Ianufacturing Company and others of XoyemLer 1, 1873. tested Ly the rule thus estaLlished, (in Human Y. Demillfl.) does not contain a sutlicient description to conyey to the flefendant Chafee any title to or interest in the premises sought to be foreclosed by the plaintiff, unless it is to be regarded as an assignment, and not as a mortgage or a deed of trust in the nature of a mort1l:age."
In general assignments to trustees for the benefit of creditors, a general description of the land com'eyed is sufficient, and the objection on account of the insufficiency of the description in the mortgage deed does not, probably, apply to the unrecorded assignments of April
STAFFORD NAT.
V. SPRAGUE.
7U1
6, 1874;hnt hy the decision in De TVolfv. 1HanztJ'gCo., Sl/]Jm, the assif?nments, so far as they attempt to convey lands lying in ConnectICut, are fraudulent and void as against non-assenting creditors. The mortgage deed and the assignments, taken together, attempt to convey the entire title of the grantors in the conveyed property to a trustee for the benefit of the creditors of the corporatiun, and of Alli.lSa and \Villiam Spragae, individually and as a copartnership, and of the other stockholders, giving a preference to those who should, within nine months from November 1, 1873, extend the time for the payment of their debts for three years from Jannary 1, 1874. The trustee is to run either or all of the mills and print-works which belonged to the corporation, or to allow the grantor to run the same, the profits being receivable by the grantee, and the expenses to be chargeable to the trust fund. Thus the property, which was a fund for the payment of debts, having been placed beyond the reach of non-assenting creditors, is further subjected for an indefinite time to the hazard of the losses resulting from the running of the mills, and the manufacturing expenses are chargeable to the entire fund, as \vell that derived from the individual property of the Spragues as from the corporate property. The intent of the mortgage and the asc signments was not only, by a set of conveyances professedly for the benefit of all the creditors, to put the entire estate into the hands of a trustee for a period not necessarily definite and determined, but also to subject the property against the will of non-assenting creditors, for a like indefinite time, to the hazards of a business exceedingly extensive, and of uncertain pecuniary profit. "No debtor has a right thus to postpone or put in peril the rights of his creditors without their consent, and a conveyance which attempts so to do, or which is eXllcuted for the purpose of depriving creditors of their right to enforce their just claims against the property of their debtor by IJlacing it beyond their rr.ach or nntrol for an unlimited, indefinite, or uncertain period, is, in conscience, as well as in law, fraudulent." De Wul;f v. '-'rf Cu., supra. This legally fra·udnlent character is appa-lent upon the face of the deeds, and parol evidence is of no avail that both the grantors and the majority of the creditors thought that the arrangement was for the best interest of all the creditors, and that the expe6ment would be a snccess, because neither the grantors nor a majority of the creditors have a legal right, in an assignment for the benefit of all the creditors, to subject the property of the assignor for an indefinite time to the h'lzards of enterprises which are not only far more extensiYe than those incidental to the ,,-inclijlg up of the business, hut are a continuation of the business of the debtors to its full extent. The cases which justify the carrying on of a manufacturing business uy a trustee until the stock is exhausted, or the purchase of new materials to enable the stock to be worked up, have no analogy to this case, in \\'hich the deeds contemplated the carrying on by the trustee
792
of a vast business. Notwithstanding the motive of the debtors and the assenting creditors was not tinged with bad faith, the deeds were. of such a character that the law pronounces them to be fraudulent towards non-assenting creditors, and refuses to lend its aid to the coercion which would compel them to enter into a business which they disapproved. The De Wolf Case was decided upon demmrer to the bill, and the court held the mortgage to be void, because it appeared upon the face of the deed that the property of the corporation was to be applied to the payment of the debts of the Spragues individually. In this case parol evidence has been given of the reason lor turning the property of the corporation and all its stockholders into a common fund upon one trust for the payment of all the debts of the grantors. I therefore do not think that the De Wolf decision upon that point can be regarded as of binding authority in a case in which other facts are shown than those stated in the bill and admitted by the pleadings. The defendant insists that the lands were held by the Spragues from 1865 to 1873 in trust for the corporation, and that the mortgage deed was a transfer of the lands to the corporation for the benefit of its creditors, and was, therefore, simply an execution of the trust, and that thereafter those lands were not subject to be appropriated at tile instance of the individual creditors for their debts. As between the corporation and the Spragues, the latter were trustees for the former; but as between the Spragues and their creditors the lands were permitted to be subject to attachment for the debts of the legal owners from 1865 to 1873. If, prior to any action by a creditor, the lands had been conveyed by a sufficient deed, they would no longer have been open to attachment, but the transfer by the mortgage deed, being governed by the rules pertaining to mortgages, and being operative only as a mortgage, did not convey the title to the Connecticut land to Chafee, and it is not material that, if it had been some other kind of a deed, it would have conveyed a valid title. The deed attempted to transfer the lands to Chafee by way of mortgage, and if it was inoperative to vest a title in him, the lands still remained liable to attachment. Let there be a decree for foreclosure, and that the trust deed and assignments are not valid to vest a title in Chafee to the lands in question as against the plaintiff, a non-assenting and attaching and judgment creditor.
UNiTED STATES V. DAUBNER.
'[93
UNITED STATES V. DAUBNER.
(Distdct Court, E. D. Wisconsin.
May 21, 1883.}
The indictment in this case waS hased npon sections 5c13S and 4 H6 of the Re,ised Statutes of the United States. Section 5c138 provides that "eyery person who makes, or canses to be made, or presents, or canses to be presented, for payment or approYal to or by any person in the ciYil * * .. service of the United States, any claim upon or against the government of the United States, knowing such claim to be false, fictitious, or fraudulent, or who, for the pur-