Court Opinion

ID: 7998204
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:46:26.152477+00
Date Added: 2024-06-11T16:35:35.419435
License: Public Domain

Chancellor.
This bill is filed to foreclose a mortgage, made by the defendant, to the President and Directors of the Real Estate Banking Company of Hinds county, and by them assigned to the complainants. In April, 1838, the defendant, with a great number of other persons, associated themselves in partnership, for the purpose of carrying on the business of private banking in the town of Clinton, in this State. The partnership-stock was to amount to a million of dollars, to be divided into shares of one hundred dollars each, and each partner was to give a bond, for the amount of his stock, payable in five, ten, and fifteen years, to be secured by a mortgage on unincumbered real estate. The defendant took stock, to the amount of $23,929’20, for which he gave his bond, payable *426in five, ten, and fifteen years after the 1st January, 1839, and made a mortgage, the purposes of which are stated, in the recital thereof, in these words : “And being desirous of still further securing the payment of said stock subscribed for, as aforesaid, punctually, at the times and periods prescribed in and by said bond and articles of association, and to bind and render himself, his heirs, executors, administrators, and assigns, liable, according to the tenor and effect and true intent and meaning thereof, in conjunction with each and every stockholder of the said capital stock of said Real Estate Banking Company of Hinds county, to all and singular the holders of the notes, bills, checks, and other liabilities, of the said Real Estate Banking Company of Hinds county, now existing, or which may hereafter exist, at any time during the period of fifteen years, the time prescribed in the bond and articles of association aforesaid, of said Real Estate Banking Company of Hinds county and then proceeds thus: “Now, therefore, this indenture witnesseth,” &c. The conditions of the deed of mortgage are thus stated : “ If the said Michael Wall, his heirs, executors, or administrators, shall well and truly pay off, discharge, and satisfy the bond aforesaid, signed, sealed, and delivered by said Michael Wall, as aforesaid, and well and truly pay and satisfy the said president, directors, and their successors, as aforesaid, for the stock subscribed by the said Michael Wall, at the times and periods when the same shall become due and payable, and well and truly pay off and discharge all the notes, bills, checks, and other liabilities, of the said Real Estate Banking Company of Hinds county, then and from thenceforth, as well this present indenture, and the estate hereby granted, as the bond aforesaid, shall cease, determine, and become absolutely null and void.”
In March, 1839, the company, having borrowed $300,000 from the complainants, transferred to them this and other mortgages of like character, as security for the repayment of the sum so borrowed. The defendants have demurred to the bill, and assigned two causes of demurrer. 1. It is insisted that the other partners or stockholders should all have been made parties defendant to this bill. The general rule in equity certainly is, that all persons in interest must be made parties. But the application of the rule to particular cases is always subject to the exercise of a sound discretion, and may be *427modified, or partially dispensed with, as the ends of justice and the exigency of the case may require. The Court will not so apply the rule as to defeat the purposes for which it was instituted; we hence find in practice, that many exceptions and restrictions to the generality of the rule have been established. Among the most obvious of these is the case where the parties are so numerous as to render it inconvenient, if not impracticable, to bring them all before the Court, without incurring the hazard of great delay and unnecessary expense. In such case, if the Court can render complete justice between the parties before it, without directly affecting the interest of others, it may proceed at once to a decree, notwithstanding the objection for want of parties. In this case, it is alleged that there were upwards of a hundred partners or stockholders in this company; that many of them are dead, leaving numerous representatives. To require that all the stockholders, or their representatives, should be before the Court, would subject the case to interminable delay, arising from the death of parties, and other causes, incident to the multiplicity of persons concerned. Story’s Eq. Pl. 104, 105. Moreover, I do not perceive that the other stockholders have any direct interest in the result of this suit. It is a proceeding in rem, upon the separate mortgage, made on the separate liability of this defendant. I think, then, that there is nothing in this ground of the demurrer. The next and principal ground relied on is, that the mortgage must be construed as being intended only to secure and cover the amount of the bond given for stock ; and as the first instalment under the bond had not become due, when the bill was filed, it is hence insisted that the suit was prematurely brought.
It thus becomes necessary for me to decide, what, in point of law, is the true interpretation of this mortgage. The terms of the articles of association are referred to, to show that pothing more was contemplated or required at the hands of each stockholder, than that he should give a bond and mortgage, to secure the amount of stock he had taken. That is true, but this did not necessarily prevent the company from afterwards making the mortgage sufficiently broad and comprehensive, to embrace those who might become its creditors, either by a loan of money, or by the receipt of its bills. We are apt to confuse ourselves, by calling this association a *428bank, and by judging of its rights, powers, and liabilities, by those rules which regulate a banking corporation. Banking, to be sure, was the purpose for which it was formed, but still it has attached to it all the incidents, powers, attributes, and liabilities of a private partnership ; it is, indeed, nothing more in fact or in law. It is true, that, to ascertain the powers, rights, and interests of partners as between themselves, you must look to the articles of partnership. But, as to third persons, these articles may be qualified, superseded, or waived, by the conduct of the partners, however positive their provisions may be ; and where they have acted contrary to, or beyond, the terms of the original articles, they will be held to have adopted such new terms, and qualifications, as may correspond with their new line of conduct. Jackson v. Sedgwick, 1 Swans. Rep. 469 ; Const v. Harris, 1 Turner & Russel, 523; Story on Part. 288. If then any change was made, as to what should be the nature and extent of the liabilities of each partner, and the form of security to be given therefor, the validity of that change cannot be questioned, because of its want of corformity to the original articles, provided it has been acted upon as a rule of partnership conduct; and this brings me back to the mortgage itself. Has such change been actually made ? It is to be observed, that this mortgage is made by one of the partners, to the partnership itself, and whatever it contains, must, therefore, be presumed to have had the partnership sanction, and to be in accordance with the partnership articles and purposes.
What, then, are the purposes and conditions of the mortgage ? I have already shown, that, according to the recital of the mortgage, its purpose was to give security for the payment of the stock bond, “ and to bind and render himself liable ” to all who then were, or might become, the creditors of the company, during the period of fifteen years. .It is this somewhat awkward phraseology, upon which the apparent difficulty arises. The inquiry is, in what did he “ bind and render himself liable " to creditors ? It surely was not thought necessary, to render a partner liable for the partnership debts, that there should be an express covenant to that effect; such liability would follow as a legal consequence from his partnership relation. I must presume, that something more than a recognition *429of this general liability was intended by the mortgage, because that would have been idle and useless. I cannot resist the conclusion, that the intent and meaning of the phrase, “ bind and render himself liable ” to creditors, meant, liable on the mortgage, according to its terms. But it seems to me, that if any doubt could exist as to the meaning of the language employed in the recital of the mortgage, that doubt is removed, and the whole matter made clear, by the explict terms of the condition. That condition is, that if the mortgagor shall well and truly pay his stock bond, at such 11 times” .as it becomes due and payable, “ and well and truly pay off and discharge all the notes, bills, checks, and other liabilities of the said Real Estate Banking Company of Hinds county,” then the mortgage deed is to become null and void. Now if the bill-holders and other creditors have no claim under the mortgage upon the mortgage property, why not cancel the mortgage so soon as the stock .bond was paid off? But this is not the only condition ; it is only to be cancelled, when all the debts of the partnership are paid; thus showing, as I conceive, that the mortgage was intended equally for the security of the partners themselves, and of those who might become its creditors. This construction appears to me to be perfectly consonant to the ends and purposes of the association. What is its nature, and what were its objects ? It was formed for the purposes of private banking ; issuing bills to circulate as money, and dealing in exchange, would of course constitute its leading business. Each individual who came into the concern, was to put something, in the shape of capital, into the common stock. Instead of complying with the ancient, and certainly the more legitimate mode of banking, by putting in so much money, they agree to adopt the more modern usage of substituting the promissory notes of the stockholders, payable in long instalments, as the capital stock, upon which they would operate. It was, therefore, a matter of the utmost importance to stockholders, as among themselves, that they should have some security, that this stock would be paid in ; and as the stock was only to be paid in at intervals of five, ten, and fifteen years, it was no less important, that a prompt and stable security should be created, upon the faith of which their bank notes might be readily taken by the public, and circulated as money. *430The mortgage, then, in the form in which it presents itself, was contrived for the attainment of these ends ; it was made, as it purports on its face, for the double purpose of securing the payment of the stock, which each one agreed to put into the common fund ; and also to give present and available security to any one who might become the creditor of the company, either by advancing it money to bank upon, or by receiving the notes or bills it might issue. It is no objection to a mortgage, that it is made to secure future advances, or to cover future and anticipated liabilities. United States v. Hooe, 3 Cranch, Rep. 73 ; Hendricks v. Robinson, 2 John. Ch. Rep. 283.
Let us see in what attitude the construction contended for by the defendants would place the creditors of the company. It must be recollected, that all the partnership property consisted in these mortgages. The company is not the owner of the lands embraced in the mortgages, but the mere mortgagee. What then would be the condition of one of its creditors, who had obtained his judgment at law, as it regards the partnership property ? He could not reach the land itself embraced in the mortgages, nor could he reach the qualified interest which the company has in them, because the interest of a mere mortgagee, before foreclosure, is in the nature of a chose in action, and cannot therefore be seized and sold under an execution at law. Jackson v. Willard, 4 John Rep. 41.
Let us see if his condition would be any better in equity. It is true, that creditors have, in equity, a quasi lion upon the partnership property, for the payment of their debts ; but this equity is to be worked out, through the medium of the equity of the partners themselves as against each other. Ex parte Ruffin, 6 Ves. 119, 126, 127. The creditors, then, would have no more summary remedy on the mortgages, than the partners themselves could have; they would consequently have to wait five, ten, and fifteen years, before the mortgage could be finally foreclosed as to all the instalments. This construction would prove an attempt by the company, by means of an arrangement among themselves, to lock up the partnership property, and place it beyond the reach of their creditors, for a long series of years. It surely was not the purpose of the company to compel any one, who might become the *431holder of one of their five dollar bills, payable on demand, to wait five, ten, or fifteen years for its payment, by telling him that the mortgages only required that the stock. should be paid in at those intervals ; and that no other security was provided for its payment. Such an arrangement would, it seems to me, have been a fraud upon the public. But the high character of the gentlemen concerned in it, utterly forbids the idea, that any such thing was in contemplation ; and I am gratified to find, from the mortgage itself, that such an inference is fully repelled. I have dwelt longer upon this point of the demurrer, than I should have thought it necessary, but for the ingenious and earnest manner in which it has been pressed by the learned counsel for the defendant. I wished to present fully the reasons which led my mind to dissent from the conclu.sions, which seemed forcible and convincing to the mind of counsel.
Let the demurrer be overruled.