Frieze v. Chapin , 2 R.I. 429 ( 1853 )

It further appeared, that the claim of said James for outlays for materials and machinery for the Atlantic De Laine Company, beyond what was agreed to be furnished by his first contract with said company, had been, together with a claim by the company against him for nearly the same amount, for breach of contract in the construction of said mill, referred to arbitrators for adjustment, and still remained unadjudicated. And it was contended for the defendant, that this claim of said James could furnish no ground for delaying the mortgagee's sale, inasmuch as the claim was against the Atlantic De Laine Company, and could, in no event, be off-set against the balance due on said mortgages, and that if it could, the court would not interfere with the power of the mortgagee upon a mere contingency that, in the adjustment of the counter claims of James and the company, a balance might be found in his favor. They further contended, that inasmuch as the petitioner had full liberty, with the other members of the company, to examine the books and records of the company, and ascertain from them the true condition of the company, his want of information upon that point was no ground for an injunction to stay the sale. The court gives to a power of sale in a mortgage the same force and validity as to any other contract. The parties make their own terms, and neither should complain, so long as the other does not violate them. But while the court upholds and enforces these powers in ordinary cases, there may be cases which are an exception to the rule. The power may be void for fraud in the inception, or subsequent circumstances may have rendered the literal execution inequitable. In the latter case the court will not interfere, except upon strong reasons. In the present case, the injunction is asked, firstly, because the plaintiff's assignor has unliquidated demands against the Atlantic De Laine Company, to the amount of about $50,000, which he thinks he should be allowed in set-off against these mortgages. The obvious answer to this is, that the mortgagees, though members of the company, are not the company. But, aside from this, it appears that the Atlantic De Laine Company claim damages, to nearly the same amount, against James, for a breach of contract in the construction of their mill, and the demands on both sides have been referred for settlement. We are bound to consider both claims equally well founded, and, certainly, we should not be warranted in enjoining the execution of a power, designed to secure a debt, ascertained and already due, upon the contingency that the issue of the controversy before the referees may show a balance in favor of James.

The other ground for the injunction is, that the trustee under these mortgages is the treasurer of the Atlantic De Laine Company, and, as such, in possession of information affecting the value of the plaintiff's shares, which he refuses to disclose, and that a sale, without such disclosure, would be at a great sacrifice. In answer to this it is said, the plaintiff is a member of the corporation, and every means of information, accessible to the treasurer, is open to him. But we think it is not enough that the records of the company are open to his inspection. The defendant, as treasurer, cannot fail to have personal knowledge of the affairs of the company, acquired in his office, which would be valuable, and should be communicated to the plaintiff, but which his position as mortgagee may make it desirable for him to withhold, and, therefore, we think an injunction should be granted, until the defendant shows the court that he has communicated to the plaintiff all the knowledge he has of the affairs of the company, which affects the value of the plaintiff's shares. The same reason does not apply with respect to the other mortgaged property, and therefore the injunction must not extend to it.

Injunction granted as to the stock in the Atlantic De LaineCompany until further order of the court.