Court Opinion

ID: 6581789
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:38:53.352666+00
Date Added: 2024-06-11T15:57:18.706177
License: Public Domain

Hovey, J.,
dissenting. In disposing of this case as it stood upon the record at the time of the hearing upon the demurrer to the plaintiff’s complaint, we held, after much deliberation, that the description in the mortgage deed of November 1st, 1873, was insufficient under the laws of this state to convey to the defendant Chafee any title to or interest in the premises which the plaintiff is seeking to foreclose. We also held that that deed, as a mortgage of real estate in this state, was fraudulent and void as against creditors of the A. & W. Sprague Manufacturing Company, who did not assent to it within the time limited by its provisions.
These conclusions, drawn from what appears on the face of the deed, are not affected by the facts found by the Superior Court from evidence taken at the hearing of the cause upon it's merits. But it appears from the finding that the deed was executed by the A. & W. Sprague Manufacturing Company, not only for the purpose of preventing shrinkage and loss as therein stated, but also with the intent and design to hinder and delay thejr creditors in the collection of their claims, by placing their property beyond the reach of ordinary civil process and with the view of preserving it in their control, possession and use, and continuing their manufacturing business by and through Chafee as trustee, until they should be able to pay their creditors in full and have left a surplus for themselves. It also appears from the finding that the indebtedness and liabilities of the A. & W. Sprague Manufacturing Company and of Amasa and William Sprague, instead of amounting in the aggregate to about §14,000,000, as stated in the deed, amounted to less than §11,000,000; and that the indebtedness of the company alone amounted to only about §8,300,000 and that of Amasa and William Sprague, including liabilities to the company, to §2,633,000, and, excluding those liabilities, to §1,624,000. So that the indebtedness and liabilities of the company and of Amasa and William Sprague at the time the deed was executed, amounted, in the aggregate, to §3,000,000 and upwards less than the amount stated in the deed.
*374For the purposes of this ease, therefore, I assume it to be settled that the deed conveyed to the defendant Chafee no title to or interest in the property in controversy in this suit for the want of a sufficient description thereof in the deed, and that if the description had been sufficient to pass the title, the deed as a mortgage of that property would have been .fraudulent and void as against creditors who did not assent to it within the time limited by its provisions. It is also well settled that an assenting creditor who gives his assent to such a deed in ignorance of its fraudulent character, is not bound by the assent and may disaffirm the act on the discovery of the fraud.
In this state of the case the first question presented is, whether the Franklin Institution for Savings assented to the deed referred to.
By the terms of the deed, the actual assent of creditors, expressed by accepting in discharge of their claims, within nine months from November 1st, 1873, notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, having three years to run, and bearing interest at the rate of seven and three tenths per cent, per annum payable semiannually,, or by agreeing to extend the time of payment of their claims for the period and according to the provisions of those notes, was necessary to entitle them to the benefit of the security which that deed provided.
From the records of the Institution for Savings, which form a part of the record in this cause, it appears that its board -of trustees, at a meeting held on the 14th of April, 1874, passed the following votes :—
“ Voted—that the standing committee be authorized to exchange the Sprague liabilities for the new notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, on the terms proposed by the trust deed to Z. Chafee; the bank retaining the original paper as collateral security.
“ Voted—that should the standing committee fail in making the above named settlement, they are hereby authorized *375to make the exchange of the above named paper as in their discretion they may deem best for the interest of the bank.” Acting upon the authority thus conferred, the standing committee of the institution, on the 15th of April, 1874, passed a vote in the words and figures following;
“ Voted—that the treasurer be authorized to receive the new notes of the A. & W. Sprague Manufacturing Company, indorsed by A. & W. Sprague, for the amount of the acceptances of Hoyt, Spragues & Co., held by this bank, •$670,000 j and also for the amount of the note of A. & W. Sgrague Manufacturing Company indorsed by A. & W. Sprague and Charles Greene, $57,000. The bank to retain the original paper with the following indorsement on the acceptances of Hoyt, Spragues & Company; A. & W. Sprague Manufacturing Company’s mortgage notes accepted as collateral hereto; time given to drawers and indorsers hereon, according to the tenor of said mortgage notes.’ All payments of interest or principal on the mortgage notes or on the original paper, to be indorsed on both the new notes and the original paper. The bank to receipt to Z. Chafee, trustee, (see copy on file,) for the new notes, and Z. Chafee, trustee, to sign an agreement to hold harmless this bank on account of the mode of computing interest should said Z. Chafee settle with any other party in a different manner, or should any court pronounce this method of settlement illegal. (See document on file.) The treasurer is further authorized to receive the interest on the above named mortgage notes in advance, allowing rebate of interest on $11,866 from April 14th to July 1st, 1874, at 7^ per cent., as per schedule on file, to which reference is now made.”
After the passage of this vote, but on the same day, the treasurer received from the defendant Chafee, as trustee, promissory notes of the description mentioned in the mortgage deed to the full amount of the A. & W. Sprague Manufacturing Company’s liabilities and also a sum of money equal to the interest thereon to July 1st, 1874, with a rebate as provided by the vote of the standing committee, and *376thereupon executed and delivered to Chafee, as such trustee, a receipt in the following terms:
“Received of Z. Chafee, trustee, under the mortgage deed of the A. & W. Sprague Manufacturing Company and others, dated November 1st, 1873, the following notes of the A. & W. Sprague Manufacturing Company, issued under said mortgage, numbered [the numbers of the notes written here.] The above are issued and accepted as collateral security for the drawers’ and indorsers’ obligations upon the following described drafts of the A. & W. Sprague Manufacturing Compamy upon Hoyt, Spragues & Co., and by the latter accepted, viz; drafts numbered—[numbers of the acceptances of Hoyt, Spragues & Co., written here with the amount of each.] In consideration of the above, time is given to the drawers and indorsers of said drafts according to the terms of said mortgage notes. Providence, April 15, 1884.
“ Tranldin Institution for Savings.,
“By T. Salisbury, Treasurer.”
Chafee then delivered to said Salisbury an instrument in writing, signed by himself as trustee, and dated Providence, April 14th, 1874, of which the following is a copy:
“ Whereas, in the exchange of the ‘ Sprague paper,’ so called, held by the Franklin Institution for Savings, under the trust mortgage executed and made to Zechariah Chafee .to secure the liabilities and indebtedness of the A. & W. Sprague Manufacturing Company, of A. & W. Sprague as co-parfners, and the individual indebtedness of William Sprague and Amasa Sprague, a difference of opinion exists between said trustee and said Institution for Savings as to the mode and manner of computing the interest on the same—the institution claiming that it is entitled to seven and three tenths interest on notes of A. & W. Sprague Manufacturing Company issued in settlement from the first January, 1874, rebating the same interest on paper not due on first January, 1874, from said first January, 1874, to the maturity of said paper; the said trustee claiming that six per cent only should be allowed up to the time *377of the exchange of said paper, and seven and three tenths interest from said day of exchange to first July, 1874; that this mode of settlement should apply to all paper not exchanged before the first day of April, 1874, that being the time when said institution became a party to said tnist mortgage. The.said institution now makes the exchange under this protest, that if any legal decision of the courts of this state should determine that the mode of calculating interest suggested by the institution is a legal mode, or the said trustee shall adopt that mode after the first of April, 1874, of computing the interest in the exchange of any other of the paper of the said mortgagors in said trust, he, the said trustee, shall pay to said institution the difference in the amounts of interest between the two modes of computation, whatever the same may be; to which protest said trustee assents and hereby agrees to pay said difference in interest accordingly.”
The assent of the Institution for Savings to the mortgage deed as it stood at the time the assent was given, is unquestionably established by the facts disclosed by these proceedings, if the institution couid lawfully assent to the terms of such a deed. It was an acceptance of the security provided by that deed for the debts due to the institution from the A. & W. Sprague Manufacturing Company and A. & W. Sprague, and upon the terms and conditions set forth in the deed. But the deed as it then stood (and it has ever since remained unchanged) did not embrace the property in controversy or any other real estate in this state. That property, therefore, was no part of the security provided by the deed for the payment of the mortgagors’ debts, and no creditor assenting to the deed had a right to rely upon it as such. The assent was limited to the terms of the deed and did not extend beyond them, but was exactly co-extensive with them. Bouvier in his Law Dictionary, vol. 1, page 154, says: “ Assent must be to the same thing in the same sense; it must comprehend the whole of the proposition, must be exactly equal to its extent and provisions, and must not qualify them by any new matter.” *378And. in that sense the assent of the Institution for Savings, in the absence of evidence to the contrary, must be presumed to have been expressed.
The next question is as to the effect of the assent upon the rights of the plaintiff, assuming, for the purposes of the inquiry, that the institution had the authority and power to express the assent. Does it preclude him from prosecuting and maintaining this action ? The counsel for the defendants contends that it does, because he claims that the prosecution of the action is an attempt on the part 'of the plaintiff to repudiate the mortgage; which, he insists, the assent estops him to do. And he cites several authorities in support of this claim. Those authorities lay down the doctrine that a creditor who has assented to a deed of trust made for his benefit and for the benefit of other creditors, shall not afterwards, though the deed be fraudulent, be allowed to repudiate or impeach it. And that, no doubt, is the established doctrine where the assent is expressed with full knowledge of all the circumstances connected with the execution of the deed. The reason is that if a party assents to a deed with knowledge that it was executed with an intent and design to hinder, delay or defraud creditors, he makes himself, in one sense, a party to the fraud and must suffer the consequences of his act. But it is also well established, as already stated, that where the assent to' such a deed is given in ignorance of its fraudulent character, the creditor is not bound by the assent, and may disaffirm the act on the discovery of the fraud. Van Nest v. Yoe, 1 Sandf. Ch., 4; Johnson v. Rogers, 14 Alb. Law Journal, 427. This, however, is not a case, as it now stands, and has hitherto stood upon the record, to which the doctrine stated has any application. The plaintiff is not now prosecuting this action for the purpose of repudiating or impeaching the mortgage deed or the assent of the Institution for Savings to the terms of it. He has no occasion or reason for doing so, so long as the deed remains as it now is, because the property he is seeking by his action to foreclose is not embraced in that deed and constitutes no part of the *379mortgaged premises. He has the same right, therefore, to appropriate that property to the payment of the claims of the institution against the A. &. W. Sprague Manufacturing Company, as a mortgagee has to appropriate property not embraced in his mortgage, to satisfy the debt which the mortgage was given to secure.
It was suggested upon the argument by the defendants counsel, and the suggestion was favorably received by a majority of the court, that as between the A. & W. Sprague Manufacturing Company and Chafee, the trustee, the propertj'- in controversy, in equity, was conveyed by the mortgage deed; that it was intended to be so conveyed to the latter, and if by mistake it was not, Chafee, by a bill in equity, might cause the deed to be so reformed as to include it. The jurisdiction of courts of equity to correct mistakes in deeds and other written agreements, so as to make them express the real intention of the parties, is well established. But the allegations in the pleadings lay no foundation for its exercise in the present case. The defendants were apprised by the decision of this court upon the demurrer that the description in the mortgage deed was not sufficient under our laws to convey to Chafee any title to, or interest in, the property in question, and that in respect to that property the deed, though not fraudulent, was void. The allegation in the complaint upon which the decision was rendered was, that the deed was fraudulent and void as to the plaintiff, because there was no description or boundaries given, and no reference was made in the deed to any book or document describing the boundaries of the land attempted to be conveyed by the deed, and the land was only described as “all the property, real, personal and mixed, not exempt from attachment by law, which the parties of the first part or any of them have and hold in the following towns of the state of Connecticut, viz. s Sterling, Sprague, Scotland and Windham.” The answer of the defendants was a simple denial of the allegation. So that the only question upon this part of the case which the court could consider was, whether the description in *380the deed was sufficient to convey to Chafee, the trustee, any title to or interest in the premises in controversy, and this question had already been determined adversely to the defendants after a full hearing upon the demurrer.' The question whether the deed was intended by the parties to convey the premises to Chafee, but by their mistake or the mistake of the scrivener who drew it failed to do so, was not, therefore, raised by the pleadings, as it might have been under the Practice Act, and as it was in the case of Cake v. Feet, 49 Conn., 501, cited by the defendants’ counsel; and consequently it was not before the Superior Court and is not now before us for our advice, and we have no right to consider it. It was also suggested by the counsel for the defendants that the expenditure of $250,000 from the trust fund in his hands in repairs upon the property in question and in restoring the portion that was swept away by the flood, should estop the plaintiff from the prosecution of this suit; and this suggestion also received the favorable consideration of a majority of the court. But it has no equity whatever to support it. The expenditures were made in 1876, nearly two years after the trustee had knowledge that the validity of the mortgage was questioned by Mr. DeWolf, the former receiver of the Institution for Savings, and while he (the trustee) was in possession under a deed of assignment from the A. & W. Sprague Manufacturing Company executed April 6th, 1874, and to which reference will hereafter be made. Besides, from the time the trustee took possession of the property until the present time, a period .of nearly eleven years, the entire income, rents and profits of the premises, amounting presumptively to more than the sums expended, have gone into his hands, and now remain there unless they have been applied to the uses and purposes mentioned in the mortgage or to some other use. Upon neither of the grounds suggested, therefore, should it be held that the plaintiff is estopped or precluded from prosecuting and maintaining this action.
There are other reasons why the plaintiff should not be thus estopped and precluded, and why, as to him and the *381depositors of the institution represented by him, the mortgage deed cannot justly or equitably be treated as a mortgage of the property in controversy, as the majority of the court propose, or reformed so as to embrace that property. In the first place, the Institution for Savings had no power, authority or right, through the action of its board of trustees or otherwise, to assent to the mortgage and bind its depositors thereby without their consent. The institution was incorporated by the General Assembly of Rhode Island in 1855 as a savings bank, and was organized and commenced business in the city of Providence soon after its incorporation. It received, loaned, invested and paid back deposits, made dividends from the earnings at stated periods, and carried on its operations as a savings institution from that time until the latter part of October, 1873, or the early part of November of the same year, when it ceased to receive and pay out deposits; and on the 11th of August, 1874, it was restrained by an injunction from the Supreme Court ot" that state, from the further exercise of its franchises, and a receiver was appointed. From the act of incorporation it clearly appears that the institution was, like the savings institutions of this state, a trustee and an agent, created for the purpose of receiving, taking care of, loaning and investing money on account of its depositors, and of paying back the same with accrued interest and dividends to its owners at such times and upon such notice as were stipulated by the parties at the time of the making of the deposits or as the charter or by-laws of the institution prescribed. Savings Bank v. New London, 20 Conn., 111; Coite v. Society for Savings, 32 id., 173; Bunnell v. Collinsville Savings Society, 38 id., 203. It had no stock and no capital. Its assets, which amounted on the 30th of October, 1873, to $2,819,723.52, including claims to the amount of $727,000 against the A. & W. Sprague Manufacturing Company and A. & W. Sprague, consisted of loans and investments made by its officers for the benefit of its depositors, who then numbered 6558; and from them the money loaned and invested was derived. In case of losses happening, other*382wise than by loans made to members of the board of trustees, or from the wilful, corrupt misconduct of the members of that board, the institution had no property out of which the losses could be made good or paid, or to which depositors could look for payment or security. The charter provided that no money should be withdrawn from the institution by a depositor except one week’s notice of the intention to withdraw the same should be given to the treasurer in writing. There was no other provision in the charter requiring a longer notice to be given, but a by-law passed October 27th, 1873, required a notice of sixty days. The depositors had, therefore, the right to treat this provision of the charter or the by-law referred to, as an irrevocable stipulation on the part of the institution that it would pay to them the amount of their deposits after the notice specified had been given and the time fixed. had expired. Under these circumstances the institution was bound as a trustee and an agent, as well as a debtor, of its depositors, to make or arrange its investments and loans in such a manner as to enable it, extraordinaries excepted, to pay to its depositors the sums due to them at the times stipulated or prescribed by its charter or by-laws, or at the time agreed upon when the deposits were made. Many extraordinary contingencies might, of course, arise to prevent the collection of money necessary to a literal performance of its obligations in this respect, even if the loans and investments were made in strict accordance with the true spirit of the charter of the institution and the objects and purposes of its organization. But of that depositors would have no cause to complain, because, in such cases, it would have been by no unlawful, wrongful, negligent or improvident act on the part of the institution or its officers that such contingencies happened. But the institution had no power, authority, or right, to place itself voluntarily, and without, the consent of its creditors or beneficiaries, in a position which would inevitably prevent the performance of this important part of As trusts, by extending the time of payment of its claims against the A. & W. Sprague Manufacturing Company and *383A. & W. Sprague, amounting to $727,000, for the period of three years.
The record shows that as early as the 28th of October, 1878, the affairs of the institution had become so much embarrassed that it was unable to pay its depositors the sums of money called for by them, according to the charter and by-laws, and that on the following day the governor of the state of Rhode Island, pursuant to law, appointed commissioners to visit and examine it and to inquire whether it had been and then was managed according to law, and to ascertain and state the condition of the same,—it having a few days previously refused payment to its depositors of sums exceeding twenty-five dollars on each account. The record also shows that the commissioners so appointed performed the duty devolved upon them, and found the institution in such a condition, owing to the large amount of suspended paper it held against the A. & W. Sprague Manufacturing Company and A. & W. Sprague, that they recommended a suspension of further payments by the institution, and submitted a report of their doings and the result of their inquiries to the General Assembly at its session in January, 1874. The record further shows that the standing committee of the institution, at a meeting held November Bd, 1873, passed a vote directing the treasurer to conform to the recommendation of the commissioners and to allow no withdrawal of deposits until he should he allowed to do so by that committee. And on November 18th, 1873, the board of trustees adopted and ordered to be published the following statement:—
“ Franklin Institution for Savings, Providence, R. I. This institution was examined on the thirtieth of October last by the commissioners appointed by the governor, and their statement of its condition has been published. In view of its situation the commissioners and the standing committee deemed it best for the bank to cease receiving and paying out deposits. The dividend usually declared November 1st, was omitted. The suspension of Hoyt, Spragues & Company and the A. & W. Sprague Manufac *384taring Company, and the extraordinary condition of the money market, render it impossible for the institution to provide for the large amount of withdrawals notified for the 16th of November. The payment of the withdrawals notified under the sixty day rule must depend upon the condition of the money market, the ability to turn its securities into money and the early settlement of the indebtedness of the above named houses. If such settlement can be reached (of which there is a good prospect) the trustees believe that the depositors will ultimately suffer no loss. The attention of the depositors is called to the annexed condensed statement of the condition of the bank as published by the commissioners.
“ By order of the board of trustees.
“T. Salisbury, Treasurer.”
The statement published by the commissioners showed the liabilities of the institution, at the time they examined it, to be $2,819,723.52, and its resources, including its claims against Hoyt, Spragues & Co., A. & W. Sprague Manufacturing Co. and A. & W. Sprague, the same amount.
On November 1st, 1873, the standing committee directed a notice to be sent to parties whose notes secured by mortgage would fall due the next month, and to certain other parties, that the situation of the institution made the speedy conversion of a large portion of its assets into money necessary in order to meet the demands of depositors. On December 1st, 1873, the board of trustees, by a vote then passed, authorized the standing committee to notify all persons indebted to the institution, where the debt was secured by mortgage and due during that month and thereafter, that the same would be payable at maturity, and that no such mortgage securities would be extended by the payment of the usual semi-annual interest in advance, and that rebate of interest would be allowed when debts were paid before maturity. On December 13th, 1873, the members of the institution, at a meeting then held, appointed a committee to examine its affairs, to nominate a new board of trustees, or to recommend the adoption of *385such measures as should be for the benefit of the institution. The committee so appointed submitted to the institution on j;he 30th of December, 1873, a report containing a statement of its condition, the names of persons proposed by them for a new board of trustees, and a recommendation that in view of the conditions stated the institution should continue its existence, and that the depositors agree to a temporary suspension of withdrawal of deposits (except dividends of profits) until such time as the indebtedness of the Messrs. Sprague should be made available. That report was referred to the new board of trustees, appointed January 3d, 1874.
On Februarj' 25th, 1874, the standing committee adopted a form of an agreement to which the signatures of the depositors were to be invited. It was as follows:—
“ We, the undersigned, depositors in the Franklin Institution for Savings, having confidence in the present board of trustees, and deeming it desirable and for the interests of the depositors that the institution should continue its business, hereby severally agree that upon the resumption of business we will not withdraw our respective deposits or any part thereof, except dividends of profits, but permit the same to remain in the institution for such reasonable time in the discretion of the trustees as shall seem to them necessary.”
This paper was submitted to the board of trustees March 2d, 1874, and that board, by vote, added thereto the following:—“The above agreement is not binding unless one half of the depositors sign^ the same, representing three fourths of the amount of the deposits.”
Depositors wene requested to sign the paper so adopted by the standing committee and amended by the board of trustees from March 2d, 1874, until April 28th, 1874, when the standing committee, at a meeting then held, declared it to be inexpedient longer to ask depositors to sign it.
What number or proportion of the 6558 depositors were invited to sign, and what number or proportion did sign their paper, the record does not show. But presumably the *386number and proportion required by the vote of the board of trustees could not be induced to sign it. For the joint special committee of the General Assembly of RJrode Island on savings banks, in a report submitted to that body in March, 1874, and before the 24th of that month, state that of the 6558 depositors some 1400 had received the dividend then recently paid out (referring to a dividend of three per cent, declared February 24th, and payable on and after March 4th, 1874;) that of that 1400 about two thirds had signified their willingness for the continuance of the bank; that the other third had declined to express themselves in favor thereof; that to this one third there was due a larger aggregate sum than to the two thirds who had agreed to a continuance; and that over 4000 were silent. In the same report that committee considered the question whether the Franklin Institution for Savings ought to wind up its business or be compelled to wind up its affairs, and in reference to it said:—“This question, the commissioners appointed by the governor to examine said institution, and ‘ inquire whether it has been and is now managed according to law, and ascertain its state and condition,’ did not answer. They say that a very large fraction of its loans were made ‘ in gross violation of the whole policy and spirit of the law,’ but they did not apply to the Supreme Court for the appointment of a receiver because they hoped that arrangements would be made for the payment of the large amount of suspended paper, and that a new board of trustees might regain the confidence of the depositors. That is to say—the commissioners suspended judgment awaiting the arrangement of the indebtedness of one concern (substantially) of $727,000; the liabilities of the institution being $2,819,723.52. The commissioners closed the doors of the institution October SOtli, 1873. Five months have elapsed. A new board of trustees has been elected, commanding the confidence of the depositors and the community. But what arrangements have been made for the settlement of this indebtedness of $727,000? None whatever. The arrangement *387proffered by the debtors has not been acceded to by the institution. If accepted it would postpone payment for three years. Whether eventually accepted or not, how much of this indebtedness will finally be paid it is impossible to say. In the meantime the bank can do no business. It does not hope to receive a dollar of deposit: it cannot safely pay out a dollar of the principal it owes its depositors. How long, in justice to the depositors, and in view of public policy, ought this state of things to be allowed to continue ? It is not to be forgotten that this unexpected locking up of resources is distress to many, ruin to some. There are 6,558 depositors; of them some 1,400 have received the dividend paid out recently. Of this number about two thirds have signified their willingness for the continuance of the bank. One third have declined to express themselves in favor thereof, and to this one third is due a larger aggregate sum than the two thirds who have agreed to a continuance. Over four thousand are silent. When the fundamental element of usefulness of a savings bank is confidence in it, how can it be said that, under such a condition of affairs, even the wisest and most honest men are likely to give this institution health and strength ? If it could be done, it can only be accomplished after the lapse of years; and in the meantime the resources of the poor, the capital of the trader, the lifelong earnings of the widow and the inheritance of orphans, are kept locked up, and they deprived of what is their own, and to which, so much of it at least as can be got, they are entitled. Justice to individuals and public policy alike demand that the available assets of this institution be as speedily as possible given to those to whom it belongs.”
This report was laid before the standing committee of the institution on the 24th of March, 1874. That committee apparently paid little heed to it; but at the close of their proceedings the treasurer, by general consent, was directed to proceed with the ordinary business of the institution as usual. There was no change in the condition of the institution between that time and the 28th of April, 1874. It *388was then struggling to obtain the consent of its depositors to continue its existence, and in the midst of the struggle, when apparently there was no. reasonable ground to hope for success, its board of trustees, in opposition to the will of its depositors as they had fully ascertained, authorized its assent to be given to the mortgage deed; and the assent was accordingly given as has been shown. A majority of the court are of opinion that the institution had the power, even under these circumstances, to express such assent, and that the depositors, and the plaintiff who represents them, are concluded and bound by the expression. In this opinion I am unable to concur. The depositors were entitled to demand payment of their deposits with the accrued interest upon them after proper notice given of their desire to withdraw them, according to the charter and by-laws, which notice in no case exceeded sixty days. As early as the 14th of November, 1873, the institution had been compelled to notify its depositors that it was impossible to provide for the large amount of withdrawals notified for the 16th of that month. It had ceased to receive and pay out deposits fifteen days before. Confidence in its management was so far gone that after strenuous exertions it failed to procure the consent of one fifth of its depositors for the continuance of its corporate existence. Under these circumstances it was plainly the duty of those in charge of the management of its affairs to collect its claims against its debtors, including those against the A. & W. Sprague Manufacturing Company and A. & W. Sprague, so far as they could with reasonable diligence, and for that purpose to use all the means which the laws of the states and of the union had provided. It could not, consistently with that duty, or with the virtually expressed will of its depositors, or its obligation to manage the affairs of the institution and the trust property under its charge for the benefit of the depositors, and with the diligence of a provident owner, assent to the terms of the mortgage, and thereby deprive its beneficiaries, for the period of three years, of the use of $727,000 of their own *389property for the benefit of those from whom the same was due.
But there is a graver reason than either of those assigned why the plaintiff should not be estopped and precluded from prosecuting and maintaining this action, and why the mortgage deed should not be changed so as to embrace the property in controversy in this suit, or be treated, as against the plaintiff, as a mortgage embracing that property. And that is, the deed is fraudulent and void as against the creditors of the A. & W. Sprague Manufacturing Company in respect to their real estate situated in this state, and may, if it be changed or treated as suggested, be impeached by non-assenting creditors, and by creditors assenting in ignorance of the fraud, and upon their application may be set aside. In the first place, the grossly exaggerated statement in the deed of the indebtedness and liabilities of the company, and of A. & W. Sprague, constituted a badge of fraud, as it must have been intentionally made j and, unexplained, it justifies a finding of fraud in fact in the concoction and execution of the instrument. Wait on Fraudulent Conv., § 228, and cases there cited. “No device can be more deceptive and more likely to baffle, delay or defeat creditors than the creating incumbrances upon their property by embarrassed men for debts that are fictitious or mainly so. The false pretence of a debt, or the designed exaggeration of one, is an act of direct fraud.” Per Ruffin, C. J., in Hawkins v. Alston, 4 Ired. Eq., 145. In the next place, the deed was fraudulent, as we held on demurrer, because it pledged the property of the A. & W. Sprague Manufacturing Company, a corporation in insolvent circumstances, not only for its own debts and liabilities, but also for the debts and liabilities of Amasa Sprague’ and William Sprague. De Wolf v. A. & W. Sprague Manufacturing Co. et al., 49 Conn., 282. Those parties, as partners and as individuals, joined the company as grantors or mortgagors in the deeds, and pledged their property for the company’s debts and liabilities as well as for their own. But they were stockholders of the company, and by the laws of *390Rhode Island were personally liable for the company’s debts. In joining in the deed, therefore, they merely pledged their partnership and individual property to secure, as far as it would secure, the payment of their own debts. Mary Sprague and Fanny Sprague, the other parties who joined in the deed, were also stockholders of the company, and therefore liable personally for its debts. They owed no other debts. But the company was not indebted to the firm of A. & W. Sprague, nor to the members of that firm as individuals; nor was it liable for the debts of the firm or of its members until it fraudulently assumed them on the first of November, 1873. It was, however, indebted to the Franklin Institution for Savings for money borrowed $727,000, and to other parties about $7,573,000, amounting in the whole to about $8,300,000; and it was legally and morally bound to pay or secure those creditors before it appropriated an3 portion of its property to the pa3ment of the debts of its stockholders or of other parties. But instead of doing so, it assumed the debts of Amasa and William Sprague, amounting, as already shown, to not more than $2,633,000, or made itself primarily liable for them, and then executed notes to the amount of $14,000,000, or more than $3,000,000 in excess of its own debts and the debts assumed, and executed the mortgage under consideration to secure their payment. The estimated value of the property of the company at that time was about $14,000,000; that of the firm of A. & W. Sprague, $2,961,075; and the individual property- of Amasa Sprague, William Sprague, Mary Sprague and Fanny Sprague, $1,140,565; but all shares of stock of the parties in corporations wherever located, but the value of which does not appear upon the record, were excepted and excluded from the conveyance.
In view of these facts and the magnitude of the fraud shown by them to have been perpetrated in the execution of the mortgage in question upon the creditors of the A. & W. Sprague Manufacturing Company, I am unable to see upon what principle of law or equity the plaintiff can *391be held, bound by the assent of the institution to the terras of the deed. If the officers of the institution who expressed the assent knew at the time of expressing it the fraudulent character of the deed, they made themselves parties to the fraud, and neither the depositors nor the plaintiff as their representative ought to be bound by the assent. If they acted in ignorance of the fraud (as the law presumes that they did,) the former receiver, Mr. DeWolf, had the right to repudiate the act, as he did, as soon as it came to his knowledge. Johnson v. Rogers, supra; Van Nest v. Yoe, supra. So that whether the officers of the institution knew that the deed was fraudulent or not at the time of assenting to its provisions, neither the former receiver nor the plaintiff was bound by the assent. I am also unable to see upon what principle or rule this court, after holding as it did upon the demurrer that the deed for the want of a sufficient description of the premises failed to convey to Chafee any title to or interest in the property in controversy, can, in the present state of the pleadings and without giving the plaintiff an opportunity to be heard, assume that the failure occurred through the mistake of the parties or the scrivener who drew the deed, and, without evidence except what appeared upon the record at the hearing upon the demurrer, and without any application on the part of Chafee or any body else, treat the deed as it stands as a sufficient conveyance of the property. Nor can I see how, if the question was raised by the pleadings and reserved for our advice, we could, after having pronounced the deed as a mortgage of real estate in this state to be fraudulent and void as against non-assenting creditors, advise the Superior Court to reform it, so that the property in controversy should be a part of the mortgaged premises, and thus aid the parties to the deed in consummating the fraud.
The decision of the Supreme Court of Rhode Island—the court of last resort in that state-—-affirming the validity of the mortgage deed, is entitled to the respect in this and other states which is due to such decisions on principles of interstate or international comity. On those principles *392conveyances of personal property valid by the law of the owner’s domicile or of the place where they are made, are recognized as valid in every state or country where the property ma3 be situated, unless the laws or established policy of such state or countiy forbid it. But these principles do not extend to conveyances of real estate. The validity of such conveyances must always be determined by the laws of the state or country where the land is situated. And this rule applies to mortgages as well as to absolute conveyances. Thus, if the laws of the state or country where the lands lie recognize the validity of a mortgage by a deposit of the title deeds by a debtor with his creditor, the laws of that state or country must govern as to the lien, although the transaction be had in another state. But if such mortgage be not recognized in the state where the lands lie, the fact that a deposit is made in a state or country where a mortgage in this form is recognized, will aiot enable the creditor to enforce it against the lands. And so if the laws of the state prohibit the making of a mortgage to secure future advances or liabilities, a mortgage in this form of land in that state would not be recognized there, although made in a state where such a mortgage would be valid; and on the other hand, such a mortgage made in the former state where it would not be valid but covering land in a state where such a mortgage is valid, would be enforced in the latter state because it is a valid conve3ance there. Under this rule, the question whether the mortgage deed under consideration, if the land in controversy were sufficiently described to make it a part of the mortgaged premises, was fraudulent or not as a mortgage of that land, must be determined by the laws of this state ; and for that reason the decision referred to cannot be permitted to control or influence or affect our judgment.
There are other reasons which seem to me to be sufficient why the mortgage deed should not be treated as a mortgage of the property in controversy, or changed so as to make it so, and why judgments should be advised in favor of the plaintiff.
*393The mortgage deed being insufficient to pass to Chafee, the trustee, any title to or interest in the property, the only title he has or ever has had to that property is that which he derived under and by virtue of the deed of assignment of April 6th, 1874, from the A. & W. Sprague Manufacturing Company. That was a general assignment of all the property of the company, real, personal and mixed, of every name and nature, wherever situate, not exempt from attachment by law, to Chafee, upon trust for the benefit of all their creditors, but with preferences in favor of those who within nine months from November 1st, 1873, brought in and extended their claims provided for in the mortgage deed for the term of time therein prescribed. The general description of the premises in that deed was, undoubtedly, sufficient under an usage that had prevailed from a very early period, to pass to the trustee the title to the property in controversy as between the parties and as to all others except non-assenting creditors. As to that class of creditors it was fraudulent and void, and so adjudged by this court for reasons stated in the case of De Wolf v. The A. & W Sprague Manufacturing Company, 49 Conn., 282. The Franklin Institution for Savings is one of the creditor's of that class, unless its assent to the deed of assignment is to be presumed from the proceedings of its officers already detailed, by which its assent was expressed to the mortgage deed, or because the deed of assignment was beneficial to the creditors for whose benefit it was professedly executed. But no such presumption arises from the proceedings referred to, as those proceedings plainly show. The only deed’ referred to in the votes of the board of trustees by which the contract of assent was authorized and in the receipt of the treasurer by which it was expressed, and also in the instrument delivered to the treasurer by Chafee upon the completion of the contract, was the mortgage deed. And there was no evidence that the officers of the institution, at that time or at any time afterwards while entrusted with the management of its affairs, had any actual knowledge or any notice of the existence of the *394deed of assignment, except such notice as the law implies from the recording of the deed in the land records of the town of Sprague on the 7th of April, 1874, and in the land records of the city of Providence on the following day. But it was contended upon the argument by the counsel for the defendants that the deed was clearly beneficial to those creditors who assented to the terms of the mortgage deed, as it, with other similar deeds of assignment executed by the firm of A. & W. Sprague and by Amasa Sprague and William Sprague individually, prevented the continuance of proceedings in bankruptcy which had been commenced before the deeds were executed, and conveyed to Chafee, the trustee, the title to the property valued at about 11,000,000, if it was not conveyed by the mortgage deed, and also conveyed much other property which was not embraced in the mortgage deed; and that under those circumstances and upon those grounds the law presumed the assent of the Institution for Savings to the deed of assignment unless its dissent was shown. It is, undoubtedly, a correct general proposition and a well established rule of law, that if a deed of assignment made to a trustee for the benefit of creditors is actually beneficial to them, their assent to the deed will be presumed unless the contrary is shown. But the rule applies only to deeds which are executed in good faith and with an'intent to benefit the creditors, not to hinder, delay or defraud them. It has no application to deeds of assignment like the one under consideration, which was executed with an intent and design to hinder and delay creditors, and which exempted the trustee, from liability for losses happening to the trust estate by his neglect, default or misconduct, or to assignments which restrict the liability of the trustee to a less degree than that which is imposed upon trustees by law, or to fraudulent assignments or fraudulent conveyances in any form. 2 Story Eq. Jur., § 1086 a; Burr, on Assignments, 3d ed., § 261, p. 350; id., § 287, p. 389; 2 Perry on Trusts, § 593; Bump on Fraud. Conv., 329; Halsey v. Whitney, 4 Mason, 206; Stewart v. Spencer, 1 Curtis C. C., 167; *395Townsend v. Harwell, 18 Ala., 301; Ashley v. Robinson, 29 id., 112; Benning v. Nelson, 23 id., 801; Baldwin v. Peet, 22 Tex., 708; Fellows v. Vicksburgh R. R. & Banking Co., 6 Rob. La., 246; Duval v. Raisin, 7 Mo., 449; Brown v. Warren, 43 N. Hamp., 430; Spinney v. Portsmouth Co., 25 id., 9. The law never presumes the assent of creditors to such assignments or conveyances and does not regard them as beneficial to creditors unless they are actually assented .to by all for whose benefit they are professedly executed, so that all may be bound by their provisions and estopped to dispute their validity. Id.; Mauldin v. Armistead, 14 Ala., 709. For if the assent of any of the creditors is refused, they may severally treat the instruments by which the assignments or conveyances are made as void, and, by appropriate legal proceedings, impeach them and cause them to be set aside, or may attach the trust estate, and by means of such attachment acquire a lien thereon to the amount of their respective claims, and, upon obtaining judgment and execution, may have sold or set off so much as may be necessary to satisfy their several judgments, or, if the estate be real estate, may severally file a certificate of their respective judgments in the town clerk's office of the town in which it is situated and continue their respective liens thereon, and, at any time thereafter, may foreclose the liens in the same manner as mortgages upon the same estate. The record shows that creditors to a large amount have never assented to the mortgage deed or to the deed of assignment, but have hitherto refused so to do. One of them, the National Bank of Commerce of New York, on December 22d, 1875, attached substantially all the property in Rhode Island embraced in those deeds, in a suit brought to the Circuit Court of the United States for the District of Rhode Island, against the A. & W. Sprague Manufacturing Company and A. &. W. Sprague, obtained judgment December 11th, 1878, took out execution, and caused the property to be sold by virtue thereof; and the defendant Chafee, at the request of creditors holding a majority in amount of the mortgage notes, paid to *396the attaching creditor from the trust funds in his hands $100,000 for the property; and the same was then transferred to three trustees, of whom Chafee was not one, upon trust to sell the same and apply the proceeds, first, to the payment of the mortgage notes, and second,' to the payment of all other of the Sprague liabilities. And other creditors are now prosecuting suits for the purpose of impeaching the deeds in question. These facts clearly show that the assent of the Franklin Institution for Savings to the. deed of assignment from the A. & W. Sprague Manufacturing Company to Chafee, cannot be presumed upon the ground of its being beneficial to it or to the creditors generally. It is equally clear that the presumption of assent to that deed cannot arise from the assent given by that institution to the mortgage deed. The provision in the deed of assignment which exempts the' trustee from liability for losses happening to the trust estate from the running of the mills and print works of the company while under his care, management and control, is so widely variant from the terms and conditions of the mortgage deed, and so directly in conflict with them and with the law against fraudulent conveyances, that such presumption, if it could possibly arise, was thereby conclusively repelled. The relation of the institution for savings to the deed of assignment is thus conclusively shown to be that of a non-assenting creditor. It is also shown that the mortgage deed conveyed to Chafee no title to, or interest in, the property in controversy; that the title and the only title he has or ever has had to that property was derived from the deed of assignment, (which fully explains Chafee’s possession of and acts of ownership over the property); and that that deed was fraudulent and void as against non-assenting creditors. The right of Mr. De Wolf, the former receiver, as the rep.resentative of the Institution for Savings and its depositors, to impeach the deed and to commence and prosecute this action to make the impeachment effective, cannot, upon these facts, justly or rightfully be questioned; and the right of the present plaintiff as his successor to continue to *397prosecute the action for the same purpose to final judgment, is equally unquestionable.
For these reasons I am of opinion that the plaintiff is entitled to judgment of foreclosure for the full amount of his lien, and that the Superior Court should be so advised.
Granger J., concurred in this opinion