EFFIE L. MACOMBER vs. CLIFTON L. BREMER, trustee, & others.

BILL IN EQUITY , filed in the Supreme Judicial Court on February 25, 1907, by Effie L. Macomber, of Braintree, as the purchaser and holder of a certain mortgage for $2,000, hereinafter called mortgage B, against Clifton L. Bremer, trustee under the will of Francis W. Sayles, Susan E. French and Edwin F. French, Charles F. Berry and James D. Colt, the trustee in bankruptcy of the estate of Charles F. Berry, praying (1) that a certain mortgage hereinafter called A be deemed to be a cloud upon the plaintiffs title, and that Charles F. Berry, or any one having his estate in the locus, be perpetually enjoined from assigning, transferring, foreclosing by suit, entry or sale mortgage A, or from exercising any of the powers therein contained, or (2) that mortgage A and note be delivered up and cancelled, and also be cancelled on record and be no longer a lien upon the premises described, or (3) that it be decreed that mortgage A be no longer a lien upon the locus as against the plaintiff or any person or persons claiming by, through or under her, and that Berry, and all persons claiming by, through or under him, be debarred and perpetually enjoined from setting up that mortgage as against the plaintiff, and (4) for further relief.

The case was submitted to Loring, J., upon the pleadings and the following agreed statement of facts:

On March 10, 1898, Charles F. Berry, not an attorney at law, was appointed trustee under the will of Francis W. Sayles, and, at the request of the beneficiaries, without sureties on his official bond, they being Jane H. Sayles and Laura H. Sayles, both of age at that time. From then until 1904 Berry was acting as trustee for three or more estates besides the Sayles estate, and during that time embezzled some hundreds of thousands of dollars. For the purposes of this case, it may be assumed that he mingled the funds of all the trust estates with his own, in a bank account standing in the name of Charles F. Berry, trustee. Berry bought a number of shares of stock in his name as trustee under the will of Francis W. Sayles, paying for them by a check on this bank account, which at that time contained more

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than $10,000 belonging to the Sayles estate, which was more than the amount necessary to pay for the stock so bought. This stock afterwards was sold by Berry through his brokers, and a check for a part of the proceeds, drawn by his brokers, payable to Charles F. Berry, trustee, was used by Berry, on May 19, 1900, in purchasing from one Trask the mortgage for $2,600 referred to as A in the plaintiff's bill, Trask indorsing the note without recourse to Charles F. Berry, and assigning the mortgage to Charles F. Berry individually; and the mortgage and assignment were recorded. The principal being overdue, Trask previously had filed in the registry of deeds a certificate of entry made by him ou the premises described in the mortgage for the purpose of foreclosing it, but this certificate was not recorded within thirty days from the date of entry.

The defendants French were the makers of the note to secure the payment of which mortgage A was given, and were the mortgagors named in the mortgage. Soon after the assignment, Berry told the defendants French that he wished to replace mortgage A by two mortgages, aggregating the same amount, for the purpose of getting a better first mortgage. The defendants French, believing Berry to be the sole owner in his own right of mortgage A, the latter having possession of the note and deed, and being ignorant that any one else had or claimed to have an interest in that mortgage, gave Berry the two notes and the mortgages called B and C in the bill, upon the agreement that the last named mortgages operated to satisfy, extinguish and pay mortgage A, and all parties intending thereby to discharge mortgage A; but they did not take up the note of mortgage A, and no written discharge ever was executed or recorded, and Berry thereafter had all three notes and mortgages in his possession until the assignment to Macomber, hereinafter mentioned. Mortgage B was for $2,000 and mortgage C was for $700. Both mortgages and both notes were made to Charles F. Berry individually. In mortgage B the property was warranted to be free from all incumbrances, and in mortgage C it was warranted to be free from all incumbrances except mortgage B for $2,000.

The Sayles beneficiaries, being deceived by Berry's accounts, had no notice of the above facts, and thereafter no rights were

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asserted under mortgage A until August, 1906, after the appointment of Clifton L. Bremer as trustee under the will of Francis W. Sayles, succeeding Berry. Nor was the interest of the mortgagee in the locus under mortgage A insured against fire during that time.

Effie L. Macomber, the plaintiff, relying upon the statement by Berry that mortgage B was a first mortgage, and the fact that it was so described in note B, and relying upon the covenants of mortgage B that the premises were free from incumbrances, and having no actual notice of mortgage A, or reason to suspect its existence (not having had the title examined), purchased from Berry the note of mortgage B, paying its full face value and accrued interest. Berry thereupon indorsed and delivered the note and assigned mortgage B to Macomber, and thereupon the assignment was recorded. Payment was made by check of Macomber, payable to Berry personally, and the check was deposited by Berry in the bank account hereinbefore mentioned, and was paid on presentation. Berry previously had acted in certain capacities for Macomber in foreclosing mortgages and collecting interest on mortgages, and had at various times notes and mortgages of Macomber in his possession, but in this matter he did not act except that he advised her that he had had the title examined, that it was perfect, that mortgage B was a first mortgage and mortgage C was a second mortgage.

Suit was brought by the defendant Bremer, trustee, in this court to recover the amount of the check given by Berry to Trask in payment for mortgage A, asserting that the word "trustee" in the check was sufficient notice. The case was decided adversely to Bremer, trustee. Bremer, trustee, also proved a claim in bankruptcy against the estate of Berry for an amount which included an indebtedness due from Berry by reason of his failure to account to the estate for the proceeds of the shares of stock sold as aforesaid; but no money, property or benefit of any kind ever was received by the Sayles estate in return for the moneys used by Berry in the purchase of the Trask assignment, unless the deposit in the bank account of the check of Macomber was a credit.

At the time of the filing of the bill the plaintiff was the holder and owner of note and mortgage B, and had entered for breach

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of condition and had recorded a certificate of such entry, and was possessed of the premises.

Berry being bankrupt, the question was as to the rights of all the parties to the bill; the defendants French joining in the prayers of the bill for such relief as might seem proper.

The justice made a memorandum of decision, containing, with other things, the following:

"The debt secured by the mortgage referred to as mortgage A was in fact and in law paid by the execution and delivery of the two notes secured by mortgages B and C. That being so, the plaintiff Macomber is not bound to pay anything to redeem from the mortgage given to secure that debt."

"There is no cross bill in this suit, and the question whether Bremer can follow the trust property into the $700 note is not before me."

He made a final decree that the mortgage referred to in the bill as mortgage A has been paid, and there "is now nothing due thereon ; and that the defendant Clifton L. Bremer, trustee, and all persons claiming under him, be perpetually enjoined from assigning, transferring or any way enforcing the note to secure the payment of which said mortgage deed was given, or any of the powers in said deed contained."

The defendant Bremer, trustee under the will of Francis W. Sayles, appealed.

The case was submitted on briefs.

C. L. Bremer, trustee, pro se.

W. P. Fowler & R. Gallagher, for Effie L. Macomber and Susan E. French.